IMF lifts its 2026 UK growth forecast to 1.3% as Healey's first budget nears
IMF raises its 2026 UK growth forecast to 1.3%, up 0.3 points from July, a little over a fortnight before Healey's first budget. It told him to stay the course on the deficit, but its warning on energy subsidies was addressed to every member government, so the budget's contents are still open.
The Board Room · Leadership desk
Key figures: the IMF forecasts UK GDP growth of 1.2% next year, a cut of 0.1 percentage point to its 2027 UK forecast, and average UK inflation of 2.8% in 2027.
| Figure | Value | Note | Claim |
|---|---|---|---|
| IMF UK GDP growth forecast for next year | 1.2% | 4 | |
| Cut to 2027 UK forecast | 0.1 pct point | 19 | |
| Avg UK inflation forecast, 2027 | 2.8% | 7 |
What happened
- Silvana Tenreyro, the fund's economic counsellor, said the UK "stands out" among G7 countries in having a plan to narrow its deficit.
- UK GDP grew 0.6% in the first quarter and 0.5% in the second, stronger than expected, with the ONS pointing to AI-related businesses as one factor.
- The Bank of England's monetary policy committee is widely expected to raise its policy rate in November, and UK mortgage rates are already rising.
Why it matters
- What it limits constraint Any energy package has to fit inside a deficit path the fund endorses, and the IFS wants Healey to explain how he will handle 35bn pounds of future spending pressures.
- What it costs cost Businesses planning for 2027 face slower forecast growth, inflation of 2.8% and borrowing costs that are already rising.
- Who has to decide decision The larger spending choices, including when to reach defence spending of 3% of GDP, are expected to wait for a spending review next year, so the 28 October budget will not settle them.
- What doesn't add up contradiction Healey cites the upgrade as resilience, while Bank of England policymaker Megan Greene reads it as proof that rates should be higher.
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The IMF gave the chancellor two pieces of advice, and they carry different weight. The deficit message was addressed to Britain. Silvana Tenreyro, the fund's economic counsellor, said, "The UK has already started a consolidation process," and "The message for the UK is simply, stay the course." [2] The energy message sits in the World Economic Outlook as guidance to member governments in general: support should be "temporary, targeted and non-distortionary" [11]. The Guardian's account does not say whether the fund commented on Healey's own energy plans.
The upgrade corrects a forecast that stood at 1.0% in July [20]. The fund also warned that prolonged high oil prices and rising interest rates meant growth was likely to "edge down" in 2027 "as higher energy prices and long-term interest rates weigh on consumption and investment" [5]. The 2027 cut is only 0.1 point [19], a mild downgrade.
The trade-off for Healey is between the relief voters are asking for and the consolidation the fund praises. He is under pressure to announce a generous energy package before bills rise sharply in January [12]. He and the prime minister, Andy Burnham, are promising voters a "breathing space" from rising costs [13]. Responding to the forecast, Healey said, "Britain's economy is showing strong international resilience in the face of these challenges." [18]
The Guardian reports that he is expected to pair the devolution of more tax revenues to mayoralties with measures to help households before winter [14]. Whether those measures will be targeted or across the board has not been reported. In our view the IMF's wording gives a targeted package a ready defence and a blanket one very little, but the fund does not write the budget.
For operators, the more durable number is inflation. The fund expects UK average inflation of 3.3% this year and 2.8% in 2027, and it singled out the UK and Japan as countries where core inflation is not expected to return to the 2% target until late next year [7]. Core inflation excludes volatile commodities such as energy [7], so that forecast describes price pressure outside the energy bills the budget is expected to address. We would plan 2027 pricing and wage assumptions against it, with the caveat that the World Economic Outlook is published twice a year [10].
What to watch
- Whether the 28 October budget makes household energy support targeted or across the board, which the fund's guidance would favour.
- The Bank of England's November decision, widely expected to raise the policy rate.
- Whether Healey explains how the budget handles the 35bn pounds of future spending pressures the IFS identified.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence78
- Adoption
- Not scored
- Hype gap0
- Incentives
- Not scored
- Confidence75
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
Silvana Tenreyro, the IMF's economic counsellor, said the UK "stands out" among G7 countries in having a plan to narrow its deficit.
- [2]
Tenreyro said: "The UK has already started a consolidation process." She also said: "The message for the UK is simply, stay the course."
- [3]
The IMF predicted GDP growth of 1.3% for the UK this year, up 0.3 percentage points from its most recent update in July.
- [4]
The IMF cut its UK growth forecast for next year modestly to 1.2%, from 1.3%.
- [5]
The IMF warned that prolonged high oil prices and rising interest rates meant UK growth was likely to "edge down" in 2027 "as higher energy prices and long-term interest rates weigh on consumption and investment".
- [6]
UK GDP growth was 0.6% in the first quarter of 2026 and 0.5% in the second quarter, stronger than expected; the Office for National Statistics has pointed to the expansion of AI-related businesses as one factor.
- [7]
The IMF expects average UK inflation of 3.3% this year and 2.8% in 2027, and singled out the UK and Japan as countries where core inflation, which excludes volatile commodities such as energy, is not expected to return to the 2% target until late next year.
- [8]
The Bank of England's nine-member monetary policy committee is widely expected to raise the policy rate at its November meeting, and UK mortgage rates have already been rising.
- [9]
Bank of England policymaker Megan Greene argued that the IMF's growth upgrade was proof that UK interest rates should be higher.
- [10]
The IMF's World Economic Outlook is published twice a year.
- [11]
In its World Economic Outlook report, the IMF advises member governments against across-the-board subsidies, saying any support should be "temporary, targeted and non-distortionary".
- [12]
Healey is under pressure to announce a generous energy support package in the budget, before the sharp rise in energy bills expected in January.
- [13]
Healey and the prime minister, Andy Burnham, are promising voters a "breathing space" from rising costs.
- [14]
Healey is expected to focus on plans to devolve more tax revenues to mayoralties, alongside measures to help households cope with higher energy bills before the winter.
- [15]
Other challenging decisions, including when the UK should aim to spend 3% of GDP on defence, are expected to be delayed until a big spending review at some point next year.
- [16]
The Institute for Fiscal Studies warned this week that the budget would be a "work of fiction" unless Healey explained how he would deal with what it said were 35bn pounds of future spending pressures.
- [17]
Healey's first budget is on 28 October, little more than a fortnight after the IMF's World Economic Outlook launch.
- [18]
Healey said: "Britain's economy is showing strong international resilience in the face of these challenges."
- [19]
The cut to the 2027 UK forecast is 0.1 percentage point.
- [20]
The IMF's July forecast for UK growth in 2026 was 1.0%.
Sources
2 independent publishers whose own reporting we read for this story.
- bbc.co.ukThree things we've learnt about the UK economy from the IMF
1 article · October 13, 2026
- theguardian.comIMF raises UK growth forecast as economist says Healey should ‘stay the course’
1 article · October 13, 2026
Topics and entities
Topics
- UK Budget
- IMF World Economic Outlook
- Interest rates and inflation
- UK economy