UK Growth Upgraded, Energy Prices and Rates to Bite in 2027

The UK economy is forecast to grow by more than previously expected this year before higher energy prices and interest rates hit growth in 2027, the International Monetary Fund (IMF) has said.

The IMF report comes as final preparations are being made to the first Budget under Prime Minister Andy Burham.

Chancellor John Healey said the government would look to 'provide some breathing space' for households in the Budget.

Healey is making the final preparations to Andy Burnham's new-look government's tax and spending plans, which will be announced on 28 October.

The UK is estimated to have the lowest annual deficit - the difference between what the government spends and brings in through taxes in a year - by 2031, suggesting it thinks public spending will be cut in coming years.

The IMF projected that the UK would have a sharp fall in borrowing and the lowest annual rate of borrowing of all G7 countries over the next five years.

Healey acknowledged that wars in the Middle East and Europe were 'hitting people in the UK and around the world', but added that Britain's economy is showing strong international resilience.

Economists have suggested Healey faces having to find £35bn to avoid cuts to public spending while meeting defence promises in his first Budget.

Healey is expected to meet with other finance ministers at the IMF's annual meeting in Bangkok, Thailand, on Tuesday to discuss how the economic impact of the Middle East and European conflicts could be limited.

The IMF said the global economy had shown a 'remarkable capacity to absorb shocks' not just from the current Middle East conflict, but also from the Covid pandemic and Russia's invasion of Ukraine.

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