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.
The UK jobs market showed fresh signs of strain in the latest labour market figures, published by the Office for National Statistics on 18 August 2026.
Those who have turned their hobby into a side hustle are being reminded by HMRC that their income from these activities may be taxable.
