The International Monetary Fund has raised its growth forecasts for the British economy in 2026, while warning that political instability and international tensions could weigh on economic activity.
The IMF now forecasts 1,0% growth for the UK this year, compared to 0,8% in its April estimates. This upward revision is largely due to improved economic performance expected in late 2025 and early 2026.
British Finance Minister Rachel Reeves welcomed the improvement as an encouraging sign for Prime Minister Keir Starmer's government.
The IMF, however, warned of new "domestic uncertainties" that could affect household spending and business investment, as the British government goes through a politically delicate period.
The organization also noted that the war in the Middle East was clouding the short-term economic outlook. British inflation is expected to peak at nearly 4% by the end of the year.
According to the IMF, a further increase in interest rates by the Bank of England may not be necessary if oil prices fall and the labor market continues to slow.
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