Skip to content
Today
Sign in

LeadershipIndependently confirmed3 publishers2 min readPublished

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

How we use AISend a correction

Photograph accompanying IMF puts UK growth at 1.3% this year and 1.2% in 2027 as energy prices and rates weigh
Photo: yahoo.com
IMF raises its UK inflation forecasts IMF forecasts for UK inflation and unemployment beside its earlier predictions, and the sum economists say Healey faces having to find.

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.

IMF raises its UK inflation forecasts
FigureValueNoteClaim
IMF UK inflation forecast, 20272.8%previously forecast 2.4%5
IMF UK inflation forecast, 20263.3%previous prediction 3.2%4
IMF UK unemployment forecast, this year5.3%previous prediction 5.6%25
Sum economists say Healey must find35 billion poundsto avoid cuts, meet defence promises27

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

  • 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.
  • 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.
  • 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.

The growth revisions are small beside the price revisions. The IMF added 0.3 points to its 2026 growth forecast [18] and took 0.1 points off 2027 [19]. It raised its 2026 inflation forecast by 0.1 points [22] and its 2027 inflation forecast by 0.4 points [20], four times the size of the 2027 growth cut [23]. 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 [10]. 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 [21]. Government borrowing costs have surged, according to the BBC, and that puts pressure on Healey to make his plans credible to financial markets [13]. 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" [15]. 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" [16]. 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 [19], 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 [11], 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 [14]. The BBC wrote that this makes a rate rise more likely [17], and City AM reported that the IMF sees UK monetary policy running tighter than in other major economies [24]. The IMF's assumed March 2027 date for Hormuz trade to resume falls in the last month of that same quarter [26], and the fund called the fallout from the conflict "highly uncertain" [8].

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

Evidence68
Adoption
Insufficient
Hype gap+10
Incentives30
Confidence72

Perspective Coverage

3 publishers
Builder
Builder 5%
Operator
Operator 42%
Investor
Investor 53%
Why these scores

Claim ledger

Ranked by verification strength, evidence, and original report placement.

  1. [1]

    The IMF forecasts the UK economy will grow 1.3% in 2026, up from the 1% it predicted in July.

    ReportedSupportedSource: BBC, citing the IMF's latest report3 sources— create a free account to open themView cited source
  2. [2]

    The IMF now forecasts UK growth slowing to 1.2% in 2027, down from a previous forecast of 1.3%.

    ReportedSupportedSource: The Independent, citing the IMF world economic outlook3 sources— create a free account to open themView cited source
  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.

    ReportedSupportedSource: BBC, citing the IMF3 sources— create a free account to open themView cited source

Sources

3 independent publishers whose own reporting we read for this story.

  1. bbc.co.uk

    1 article · October 12, 2026

    UK growth upgraded but energy prices and rates to bite in 2027
  2. cityam.com

    1 article · October 12, 2026

    UK economy to suffer second-highest inflation in G7
  3. independent.co.uk

    1 article · October 12, 2026

    UK households to face sharper rise in inflation than previously thought, IMF warns

Share your take

Let Clarity write the post for you.

Signed-in readers get a short post drafted on this story in the register they choose — narrative, analytical, or a direct position — editable to the last word before it goes anywhere. The share buttons at the top of this story work without an account.

Create a free account to composeSign in

Topics and entities

Follow any of these and your For You feed starts watching them — no settings page required.

Topics

Entities

Loading related stories