IMF upgrades UK growth forecast to 1.3% but warns rising energy costs will slow recovery in 2027

The International Monetary Fund has lifted its UK growth forecast for 2026 from 1% to 1.3%, putting Britain among the fastest-growing G7 economies alongside Germany, but warned that higher energy costs tied to the US-Iran conflict and rising borrowing rates will drag growth back to 1.2% next year. Chancellor John Healey welcomed the upgrade with his first Budget just a fortnight away, though the IMF urged governments to keep any cost-of-living support targeted and funded. The IMF singled out Britain as a standout among major economies on borrowing discipline, projecting it will have the lowest annual deficit in the G7 by 2031.

Reform UK has fallen to third place for the first time since 2024, with Labour on 24%, Conservatives on 23% and Reform on 21%, according to a new YouGov poll.

UK unemployment is now forecast at 5.3% this year, down from an earlier prediction of 5.6%, suggesting the labour market has held up better than expected.