The IMF has handed the government a welcome upgrade ahead of the Budget, but the improved 2026 outlook comes with a warning that the relief may be short-lived. Stronger growth is set against a 2027 squeeze from energy prices, persistent inflation and high borrowing costs.

The fund expects UK growth of 1.3% in 2026, up from its July forecast of 1%, before a slowdown to 1.2% next year. It also expects inflation to average 3.3% this year and 2.8% in 2027 — still above the Bank of England’s 2% target. The immediate improvement reflects a better-than-expected first half, but the outlook is vulnerable to the economic effects of conflict in the Middle East and elevated interest rates.¹

For John Healey, the figures support the case that Britain is comparatively resilient. IMF chief economist Silvana Tenreyro said the UK had already begun fiscal consolidation and “basically stands out, along with India”; the fund projects Britain will have the lowest annual borrowing in the G7 by 2031.² The government’s argument is that discipline can coexist with measures that give households “breathing space.”

Others stress how modest that success remains. Former Bank of England deputy governor Sir Howard Davies described Britain as “winning a slow bicycle race,” arguing that its G7 position partly reflects weaker performance elsewhere.³ The left-leaning case for the Budget focuses on limiting the damage to households: rather than broad subsidies, it points to more targeted energy-bill support for lower-income families as prices rise.¹

Conservative and market-oriented critics place the emphasis elsewhere. Andrew Griffith argues the Chancellor should expand domestic energy production and restrain welfare spending, warning that further tax rises would mean “slower growth and working people will pay for it.”⁴ The Institute of Economic Affairs similarly identifies high taxes and costly energy as barriers to investment.²

The shared conclusion is that the Budget must address both living costs and strained public finances. The dispute is over whether the priority should be tightly targeted support, further fiscal consolidation, or a broader attempt to reduce taxes and energy costs.