IMF revises up UK growth forecast for 2025

NEW YORK: The International Monetary Fund on Tuesday slightly upgraded its UK growth forecast for this year but warned over fallout from US tariff threats as it held its estimate for 2026.

Britain’s economy is expected to expand 1.2 percent in 2025, up from 1.1 percent estimated last month, the IMF said in its latest outlook document for the UK, partly citing “very strong” first-quarter growth on better-than-expected business investment.

It warned, however, that global trade tensions would hit UK growth by 0.3 percent for the remainder of this year.

This is due to “persistent uncertainty, slower activity in UK trading partners, and the direct impact of remaining US tariffs on the UK”, the IMF said.

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The Fund held its forecast that the UK economy would grow by 1.4 percent in 2026.

Britain’s Labour government welcomed the updated figure, with finance minister Rachel Reeves emphasising that three recently-struck trade agreements — with the US, EU and India — would help with “protecting jobs, boosting investment and cutting prices”.

The UK and the United States this month reached a post-Brexit deal which reduces tariffs on British cars and removes those on steel and aluminium.

Britain in return will open up markets to US beef and other farm products.

But a 10-percent levy imposed on the UK remains in tact as part of Donald Trump’s tariffs blitz on key trading partners.

The IMF added that the three trade deals are “just first steps”.

“We see them as very important at the sectoral level, but not necessarily impacting massively or significantly our forecast,” IMF mission chief to the UK Luc Eyraud said in a press briefing.

The Fund added that “persistently weak productivity remains the UK’s primary obstacle to lifting growth and living standards”.

British gross domestic product expanded by 0.7 percent in the January-to-March period, official data showed.

The Bank of England has raised its UK growth forecast for this year but downgraded expectations for 2026 as it warned of heightened economic unpredictability amid Trump’s tariffs.