The United Kingdom's economic growth is projected to slow this year, according to the latest forecasts from the International Monetary Fund (IMF), a development that could impact Prime Minister Sir Keir Starmer's economic agenda. The IMF projections indicate that the UK remains behind its target of achieving the fastest growth among G7 nations.
The forecast estimates UK growth at 1 percent for the current year, a decrease from 1.4 percent in 2025. While this rate places the UK ahead of Germany, France, Italy, and Japan, it falls slightly behind Canada and is significantly lower than the anticipated growth rate for the United States.
This projection comes despite recent claims by Starmer stating that the UK economy was strengthening and growing faster than its peers. Although the UK experienced stronger growth than other G7 countries in the first quarter of 2026, it has not consistently led the group since the Labour party took power.
The IMF's latest outlook suggests that the strong performance early in 2026 may not continue throughout the remainder of the year. Some businesses have expressed concerns that recent policy changes, including tax increases and minimum wage hikes under Starmer and Chancellor Rachel Reeves, are hindering private sector growth.
The IMF's World Economic Outlook update maintained its previous forecast for the UK, with growth expected to rebound to 1.3 percent in 2027. The fund has previously noted the UK's exposure to fluctuations in energy prices, particularly due to its status as a net energy importer and the ongoing conflict in Iran which has driven up oil and gas prices. Critics have also pointed to net-zero policies potentially affecting investment in North Sea drilling.
In contrast, the United States, a net energy exporter and benefiting from a tech boom, is expected to see its economy grow by 2.3 percent this year and 2.2 percent next year, making it less vulnerable to the energy market shocks.
Globally, the IMF report has slightly lowered growth expectations and increased inflation forecasts, citing the Middle East conflict as a factor. The fund warned that risks to the global economic outlook remain significant, with the potential for renewed conflict to cause further volatility in commodity prices, disrupt supply chains, and impact financial conditions.
Chancellor Rachel Reeves acknowledged the IMF forecasts, highlighting an upgrade for the UK made in May. She stated that the UK is the only G7 country whose growth forecast for the year has been upgraded by the IMF, attributing this to the government's economic plan. Reeves emphasized that current policies position the economy to better manage the costs associated with the war in Iran while fostering long-term growth through investments in AI, regional development, and strengthening trade with the European Union.