The International Monetary Fund has upgraded its UK growth forecast to 1.8% for 2026, putting Britain on course to be the best-performing economy in the G7 this year, the IMF confirmed in its latest World Economic Outlook.
The upgrade, from a previous forecast of 1.4%, reflects stronger-than-expected consumer spending, a resilient labour market, and the positive impact of falling inflation on household real incomes.
“The UK economy has surprised on the upside,” said the IMF’s chief economist in a press briefing. “Inflation is back to target, wages are growing in real terms, and business investment is picking up. The outlook is genuinely positive.”
The UK’s projected growth of 1.8% compares with 1.6% for the United States, 0.9% for Germany, 1.1% for France, and 1.2% for Canada. Japan and Italy round out the G7 with forecasts below 1%.
Chancellor of the Exchequer welcomed the upgrade as evidence that the government’s economic plan is working. “The IMF has put Britain top of the G7 growth league,” the Chancellor said. “That didn’t happen by accident. It’s the result of difficult decisions and a clear plan.”
Shadow Chancellor countered that the upgrade reflects global trends rather than government policy, noting that the IMF also upgraded many other economies. “The Chancellor is taking a victory lap on borrowed time,” she said. “Growth is still below pre-pandemic trend, productivity remains stagnant, and business investment is recovering from a very low base.”
The IMF also warned of downside risks, including persistent geopolitical tensions, the pace of interest rate cuts from the Bank of England, and the UK’s medium-term fiscal position. Public sector net debt remains above 100% of GDP.
City economists broadly welcomed the upgrade but cautioned against over-optimism. “1.8% is good, not great,” said Ruth Gregory of Capital Economics. “It puts the UK at the top of a very weak G7 table. The structural challenges — low productivity growth, an aging population, Brexit-related trade frictions — haven’t gone away.”
The Bank of England is expected to hold interest rates at 4.25% at its next Monetary Policy Committee meeting, with markets pricing in the first rate cut in August.