UK set to be second-fastest growing G7 economy, says IMF

It's not predicted to stay there for long though...

The IMF forecasts a growth rate of 1.3% for 2025 in the UK. Whilst still a relatively modest figure, this would outperform all other G7 economies apart from the US.

At the same time, inflation in the UK is expected to become the highest in the G7, as a result of larger energy and utility bills.

Set to average out at 3.4% this year and 2.5% in 2026, the IMF forecasts inflation will then fall to 2% by the end of next year.

The G7 is a group of seven of the most advanced economies in the world. Along with the UK and US, the group includes France, Germany, Italy, Canada and Japan. However, huge economies such as China and India are not part of the group.

Whilst the UK is predicted to overtake Canada into second place this year, the North American nation is then expected to retake second spot in 2026 with economic growth of 1.5%. The UK economy is predicted to stay at 1.3% for 2026.

The European trio of Germany, France and Italy are all forecast to grow at slower rates of between 0.2 and 0.9% in 2025 and 2026.

Welcoming the new IMF forecasts, Chancellor Rachel Reeves said this was “just the start” and acknowledged that for “too many people, our economy feels stuck.”

“Working people feel it every day, experts talk about it, and I am going to deal with it,” she added.

The moderate growth rates are a result a chaotic year of international trade and geopolitical tensions. Most notably, the global economy was thrown into turmoil after Donald Trump’s tariff policy. The IMF said the response to the tariffs has so far been “muted”, but that tariff costs which had been absorbed by exporters and retailer were now feeding into higher goods prices.

The “resilience is giving way to warning signs”, the IMF said, pointing to Brexit as an example of how there can be a delay before falls in investment following major changes in global trade arrangements take effect, the BBC reports.