The International Monetary Fund (IMF) has updated its economic forecasts, positioning the UK as the G7’s second-fastest growing economy. This comes amid varying growth rates among its counterparts, such as Canada, Germany, France, and Italy.
UK’s Economic Growth Forecast
The IMF’s latest forecast indicates that the UK economy will grow at a faster rate than Canada. This adjustment follows a period where Canada faced significant downgrades due to trade tensions, impacting its economic performance. Meanwhile, growth predictions for Germany, France, and Italy remain sluggish, ranging between 0.2% and 0.9% for 2025 and 2026.
Government Responses
Chancellor Rachel Reeves expressed optimism about the IMF’s revised outlook, highlighting it as a positive step. She stated, “But know this is just the start. For too many people, our economy feels stuck.” Reeves emphasized the importance of addressing economic challenges that affect working individuals daily.
Conversely, Shadow Chancellor Sir Mel Stride offered a more cautious take. He described the IMF assessment as “grim reading,” noting that UK households are under strain from rising living costs and declining business confidence. He attributed these difficulties to the policies implemented since Labour took office.
Driving Factors Behind Growth
The IMF’s revision was influenced by robust economic activity in the UK during the first half of 2025. An improved trade outlook has also contributed positively, particularly following the recently established trade agreement between the US and the UK.
Comparative Growth Rates
| Country | Projected Growth Rate (2025-2026) |
|---|---|
| UK | Higher than Canada |
| Canada | Significantly downgraded |
| Germany | 0.2% – 0.9% |
| France | 0.2% – 0.9% |
| Italy | 0.2% – 0.9% |
As the UK navigates its economic challenges, the IMF’s upgrade serves as a beacon of potential. Still, significant concerns about living costs and business confidence remain prevalent in discussions among policymakers.
