IMF puts UK growth at 1.3% this year and 1.2% in 2027 as energy prices and rates weigh
IMF raised its 2026 UK growth forecast to 1.3% from 1%, and trimmed 2027 to 1.2% from 1.3%. Its 2027 inflation forecast moved further, to 2.8% from 2.4%, and the IFS says inflation will erode departmental budgets before the 28 October Budget.
The Board Room · Leadership desk
Key figures: the IMF forecasts UK inflation of 2.8% in 2027, previously 2.4%, and 3.3% in 2026, previously 3.2%. It expects UK unemployment of 5.3% this year, down from a prediction of 5.6%. Economists suggest Healey faces finding 35 billion pounds to avoid cuts while meeting defence promises.
- 2.8% IMF UK inflation forecast, 2027, claim 5 previously forecast 2.4%
- 3.3% IMF UK inflation forecast, 2026, claim 4 previous prediction 3.2%
- 5.3% IMF UK unemployment forecast, this year, claim 26 previous prediction 5.6%
- 35 billion pounds Sum economists say Healey must find, claim 13 to avoid cuts, meet defence promises
| Figure | Value | Note | Claim |
|---|---|---|---|
| IMF UK inflation forecast, 2027 | 2.8% | previously forecast 2.4% | 5 |
| IMF UK inflation forecast, 2026 | 3.3% | previous prediction 3.2% | 4 |
| IMF UK unemployment forecast, this year | 5.3% | previous prediction 5.6% | 26 |
| Sum economists say Healey must find | 35 billion pounds | to avoid cuts, meet defence promises | 13 |
What happened
- The IMF said the 2027 slowdown comes from higher energy prices and long-term interest rates weighing on household spending and business investment.
- City AM reported that UK growth is joint-second highest in the G7 this year, level with Germany at 1.3%, with only the US ahead in both years.
- The Independent reported that the IMF now sees UK unemployment at 5.3% this year, down from a previous forecast of 5.6%.
- The forecasts assume trade across the Strait of Hormuz resumes in March 2027, according to City AM.
Why it matters
- What it costs cost Healey has an estimated 35 billion pounds to find to avoid cuts while meeting defence promises, so each pound of household support has to come from tax, cuts or extra borrowing.
- What it limits constraint Firms planning 2027 investment face a rate path the IMF expects to be tighter than in other major economies, on top of the energy costs it blames for the slowdown.
- Who's exposed exposure The IMF's named downside is an extended Middle East stalemate. It said that could dampen expansion and weaken government fiscal positions, the same public finances the Budget has to work within.
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The growth revisions are small beside the price revisions. The IMF added 0.3 points to its 2026 growth forecast [20] and took 0.1 points off 2027 [21]. It raised its 2026 inflation forecast by 0.1 points [23] and its 2027 inflation forecast by 0.4 points [22], four times the size of the 2027 growth cut [27]. A 2027 plan that used the previous 2.4% inflation figure is now short by that 0.4 points [5].
The Budget forces a trade-off between help for households and credibility with lenders, and the sources show each side stating its half. Chancellor John Healey said the government would look to "provide some breathing space" for households [11]. The IMF report said extra government spending to support households or businesses "should be used sparingly" and should not "complicate the task of monetary policy", City AM reported [10]. Government borrowing costs have surged, according to the BBC, and that puts pressure on Healey to make his plans credible to financial markets [25]. The Resolution Foundation sits between the two. It said the challenge of bringing down borrowing "must be paired with the pressing need for fresh cost of living support to help families facing a difficult winter ahead" [16]. Narrow, targeted support is the version of breathing space that all three positions can accommodate, in our view.
The sources also carry a political reading of the trade-off. Andrew Griffith, the Conservative shadow chancellor, said that if Healey "reaches for more tax rises", "he is choosing slower growth and working people will pay for it" [18]. The IMF figures cannot settle that. The IMF attributes the 2027 slowdown to energy prices and long-term rates [3], and the cut is 0.1 points [21], but the reports do not say what tax or spending assumptions sit inside the forecast. The BBC read the IMF's projection of the lowest annual deficit in the G7 by 2031 as suggesting the fund thinks public spending will be cut; that is the BBC's inference [28].
The Budget on 28 October is this quarter's decision [12], and next quarter will test it. The Bank of England expects inflation "slightly above 4%" in the first quarter of 2027, partly because of another rise in the household energy price cap in January [15]. The BBC wrote that this makes a rate rise more likely [19], and City AM reported that the IMF sees UK monetary policy running tighter than in other major economies [9]. The IMF's assumed March 2027 date for Hormuz trade to resume falls in the last month of that same quarter [24], and the fund called the fallout from the conflict "highly uncertain" [7].
What to watch
- Whether the 28 October Budget includes household energy support, and how narrowly it is targeted.
- The Bank of England's inflation path into early 2027 against its own forecast of slightly above 4%.
- Whether trade across the Strait of Hormuz resumes by the March 2027 date the IMF assumed.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence80
- Adoption
- Not scored
- Hype gap+10
- Incentives
- Not scored
- Confidence75
Perspective Coverage
9 publishers- Builder
- Builder 14%
- Operator
- Operator 28%
- Investor
- Investor 58%
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
The IMF forecasts the UK economy will grow 1.3% in 2026, up from the 1% it predicted in July.
- [2]
The IMF now forecasts UK growth slowing to 1.2% in 2027, down from a previous forecast of 1.3%.
- [3]
The IMF said UK growth slows in 2027 because higher energy prices and long-term interest rates weigh on household spending and business investment.
- [4]
The IMF forecasts UK consumer price inflation of 3.3% in 2026, up from a previous prediction of 3.2%.
- [5]
The IMF expects UK inflation to slow to 2.8% in 2027, significantly higher than the 2.4% it previously forecast.
- [6]
The IMF based its forecasts on the assumption that trading across the Strait of Hormuz would resume in March 2027.
- [7]
The IMF said the economic fallout from the US-Iran conflict remained "highly uncertain".
- [8]
The IMF said an extended stalemate or worsening crisis in the Middle East could "keep energy and food prices elevated and volatile", dampening expansion and weakening government fiscal positions.
- [9]
The IMF report said monetary policy in the UK is set to be tighter than in other major economies.
- [10]
The IMF report said extra government spending to support households or businesses "should be used sparingly" and not "complicate the task of monetary policy".
- [11]
Chancellor John Healey said the government would look to "provide some breathing space" for households in the Budget.
- [12]
The government's tax and spending plans will be announced in the Budget on 28 October.
- [13]
Economists have suggested Healey faces having to find 35 billion pounds to avoid cuts to public spending while meeting defence promises in his first Budget.
- [14]
The Institute for Fiscal Studies said inflation will erode the budgets of government departments ahead of the 28 October Budget, creating the need for either large cuts to some public services or top ups to spending plans totalling tens of billions of pounds.
- [15]
The Bank of England expects UK inflation to lift to "slightly above 4%" in the first quarter of 2027, partly linked to another increase in the household energy price cap in January.
- [16]
The Resolution Foundation said "The challenge of continuing to bring down borrowing must be paired with the pressing need for fresh cost of living support to help families facing a difficult winter ahead", and said well-targeted support was needed for those "struggling to heat their homes".
- [17]
UK GDP growth is joint-second highest in the G7 this year at 1.3%, level with Germany, and UK growth is higher in both 2026 and 2027 than any country barring the US.
- [18]
Conservative shadow chancellor Andrew Griffith said that if Healey "reaches for more tax rises" in his Budget, "he is choosing slower growth and working people will pay for it".
- [19]
The BBC wrote that the Bank of England's prediction that inflation could rise above 4% at the beginning of next year makes it more likely that interest rates will rise.
- [20]
The 2026 UK growth forecast was raised by 0.3 percentage points.
- [21]
The 2027 UK growth forecast was cut by 0.1 percentage points.
- [22]
The 2027 UK inflation forecast was raised by 0.4 percentage points.
- [23]
The 2026 UK inflation forecast was raised by 0.1 percentage points.
- [24]
March 2027, the date the IMF assumes Hormuz trade resumes, is the third month of the first quarter of 2027, the quarter in which the Bank of England expects inflation slightly above 4%.
- [25]
Government borrowing costs have surged, placing pressure on the chancellor to ensure his plans are credible in the eyes of financial markets.
- [26]
The IMF expects UK unemployment of 5.3% this year, down from a prediction of 5.6%.
- [27]
The 2027 inflation revision is four times the size of the 2027 growth revision.
- [28]
The IMF projects the UK will have the lowest annual deficit in the G7 by 2031; the BBC says this suggests the IMF thinks public spending will be cut in coming years.
Sources
8 independent publishers whose own reporting we read for this story.
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Topics and entities
Topics
- UK Budget
- IMF World Economic Outlook
- Energy prices
- Inflation
- UK economy
Entities
- Silvana Tenreyro
- Resolution Foundation
- Institute for Fiscal Studies
- Bank of England
- Andrew Griffith
- International Monetary Fund
- John Healey