IMF upgrades UK growth forecast but warns over Trump policies

The International Monetary Fund has upgraded its forecast for UK growth this year in an update to its biannual assessment of the global economy, while taking a swipe at plans by Donald Trump's incoming US administration over the potentially destabilising effect of large-scale tax cuts, import tariffs and weaker regulations.

- Phillip Inman

In a fillip to the Labour government, the Washington-based organisation said it expected the UK economy to grow by 1.6% in 2025, up from an earlier forecast of 1.5%.

The IMF judged that Labour's increase in investment spending, improved household finances and a series of interest rate cuts by the Bank of England would give the UK economy a lift this year. UK growth for 2024 was downgraded, however, to 0.9% from a previous forecast of 1.1%.

The UK upgrade for this year was in contrast to the eurozone, where the IMF revised down its forecasts for growth in 2025 in Germany, France and Italy.

Analysts at the IMF said they believed the Bank of England would cut interest rates four times this year, reducing the headline rate from 4.75% to 3.75%.

A spokesperson for the IMF said Labour's budget rules showed the government was committed to bringing down the UK debt over the longer term. The chancellor, Rachel Reeves, said: "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."