The International Monetary Fund (IMF) has upgraded its forecast for British economic growth this year, while warning that inflation, energy prices and borrowing costs could constrain the recovery in 2027.
In its October 2026 World Economic Outlook, published on Tuesday 13 October, the IMF forecasts that UK gross domestic product (GDP) will grow by 1.3% in 2026, up from its July estimate of 1.0%. Growth is expected to ease to 1.2% in 2027.
IMF's latest UK forecasts
- GDP growth in 2026: 1.3%, compared with the 1.0% July forecast.
- GDP growth in 2027: 1.2%.
- Average inflation in 2026: 3.3%.
- Average inflation in 2027: 2.8%.
Both inflation projections remain above the Bank of England's 2% target. These figures are forecasts, not confirmed outcomes.
Stronger growth this year, pressure next year
The upward revision for 2026 reflects a stronger near-term performance than previously expected. Reporting on the outlook has highlighted investment linked to artificial intelligence as one of the factors supporting economic activity.
However, the IMF expects higher energy prices and longer-term interest rates to weigh on household spending and business investment in 2027. Continued geopolitical disruption could add further pressure to prices and public finances.
Warning ahead of the Budget
The findings come ahead of Chancellor John Healey's Budget, scheduled for 28 October. The IMF has urged the government to maintain its plans to reduce the fiscal deficit while responding carefully to pressures from energy costs and debt interest.
The IMF's assessment does not amount to a recommendation for a specific UK tax rise, nor does it confirm any future Treasury policy. Budget decisions remain for ministers and Parliament.
What the figures mean
The latest outlook offers a mixed picture. Britain is expected to grow more quickly in 2026 than the IMF forecast in July, but growth is still modest and inflation is projected to stay above target through 2027. The IMF's projections may change as economic conditions develop.