Britain's economy will grow fastest in Europe this year

IMF upgrades UK forecast to outpace Germany and France

- MILLIE COOKE and HOWARD MUSTOE

Rachel Reeves has hailed new growth forecasts that claim the UK will be the fastest-growing major European economy over the next two years.

The International Monetary Fund’s latest World Economic Outlook report, published yesterday, indicates that Britain’s gross domestic product (GDP) is on track to grow by 1.6 per cent in 2025, up on the 1.5 per cent it predicted last October. Combined with inflation easing slightly this week, the latest figures give the beleaguered chancellor some breathing space after weeks of pressure over Britain’s finances.

Concerns over potential stagflation – where growth is stagnating but inflation remains high – caused a jump in borrowing costs and a fall in the pound this month, but both metrics have eased back in recent days following the slowing down of inflation in the UK and US.

The IMF said growth is now expected to accelerate to 1.6 per cent in 2025 and 1.5 per cent in 2026, outstripping fellow European economies in Germany, France and Italy.

“The UK is forecast to be the fastest growing major European economy over the next two years and the only G7 economy, apart from the US, to have its growth forecast upgraded for this year,” Ms Reeves said. “I will go further and faster in my mission for growth through intelligent investment and relentless reform, and deliver on our promise to improve living standards in every part of the UK through the plan for change.”