The British economy has received a welcome boost from the International Monetary Fund (IMF). If you are investment planning in Cheshire, Oswestry or the broader UK economy, growth projections for 2026 have been raised to 1% from 0.8%.
The news comes in spite of lingering concerns over the Iran war and the potential impact on consumption and investment decisions. In its latest report, the IMF highlighted resilience in the UK economy alongside warnings over the longer term inflationary effects of higher food and energy prices, if the conflict continues.
The IMF forecasts come on the back of data released this month showing growth of 0.6% in Q1, with sectors such as retail and construction performing particularly strongly. As a net importer of energy, the UK is sensitive to geopolitical events and associated price increases, but the country has so far navigated the crisis with more ‘momentum’ than anticipated.
As such, the IMF believes that there is no need for the Bank of England to increase interest rates, which are currently set at 3.75%. It said that maintaining rates at the current levels for the rest of 2026 is likely to be enough to restore inflation to the Monetary Policy Committee’s 2% target by the end of 2027.
The IMF added that it was important the Treasury remains committed to its borrowing and deficit reduction rules, emphasising that investors and the markets crave stability and predictability. It concluded that there was limited scope for tax rises without reforms and that there will be difficult decisions ahead as spending rises, under pressure from an ageing population, increased security and climate-related policy.
