UK Economy on the Mend, Says IMF - But Bumps in the Road Remain

The International Monetary Fund (IMF) Executive Board has concluded its 2025 Article IV Consultation assessing that the UK economy is recovering, with modest growth expected this year and stronger momentum building into 2026. But global uncertainty, cautious consumers, and inflation pressures could still slow things down.

The IMF forecasts growth of 1.2% in 2025, rising to 1.4% in 2026. Business investment is picking up, and public spending from the last budget is helping support the recovery.

Inflation still a concern - but expected to ease

While inflation is expected to average 3.2% this year, the IMF estimates that it should fall back to 2.3 percent next year.

Government finances: on the right track, if plans hold

The IMF says the government’s current spending and borrowing plans are about right - encouraging growth while keeping debt in check. But it stressed the importance of sticking to the deficit reduction plan over the next five years.

Interest rates: gradual cuts make sense

With inflation still above target and the outlook uncertain, the IMF supports the Bank of England’s cautious approach to cutting interest rates.

Overall, the message is cautiously upbeat. Growth is returning, and the right policies are largely in place. But the IMF says it’s vital to prioritise long-term reforms - especially around skills, planning, and economic stability - and avoid frequent policy changes.

See: https://www.imf.org/en/News/Articles/2025/07/23/pr-25262-united-kingdom-imf-executive-board-concludes-2025-article-iv-consultation