The UK economy is expected to grow by 1.2% in 2025, according to the International Monetary Fund, slightly above its previous forecast of 1.1%.
The upgrade follows stronger-than-expected growth in the first quarter of 2025, driven by consumer spending and business investment. However, the IMF warned that global trade tensions, rising employer taxes, and US tariffs will weigh on growth, cutting 0.3 percentage points from output by 2026.
The fund praised government reforms and infrastructure plans but stressed that Chancellor Rachel Reeves must stick to her fiscal rules.
These include balancing day-to-day spending with tax income and reducing debt as a share of national income by 2029–30.
The IMF suggested cutting the number of official budget forecasts to reduce uncertainty, but acknowledged the government’s stance that the rules are non-negotiable.
Inflation, which rose to 3.5% in April, is expected to ease gradually and return to the Bank of England’s 2% target by late 2026.