The IMF’s upgraded forecast gives the UK a brighter headline before the Budget, but its outlook carries a clear qualification: the recovery is expected to lose momentum as energy costs and interest rates weigh more heavily in 2027.

The Fund expects GDP to grow by 1.3% in 2026, up from its previous 1% projection, before slowing to 1.2% the following year. Supporters of the government’s approach point to the UK’s relative fiscal position: IMF chief economist Silvana Tenreyro said Britain “basically stands out, along with India” for beginning to bring borrowing under control.¹ The government has also stressed that it is forecast to be the joint second-fastest-growing G7 economy this year and to have the bloc’s lowest deficit by 2031.²

That relative improvement is not the same as a strong expansion, however. Sir Howard Davies described the comparison as “winning a slow bicycle race,” arguing that Britain is still growing slowly even if some peers are doing worse.³ The IMF expects inflation to average 3.3% in 2026 and 2.8% in 2027, above the Bank of England’s 2% target, as conflict-related disruption raises food and energy costs.

The competing Budget prescriptions reflect that tension. The IMF has urged governments to use cost-of-living support “sparingly” and ensure any new spending or tax cuts are funded, cautioning against measures that could undermine fiscal credibility.⁴ Household-focused advocates instead argue for tightly targeted help, including expanding energy-bill assistance to lower-income families, rather than broad subsidies.

Conservative shadow chancellor Andrew Griffith says the answer is more domestic energy production and restraint on welfare spending, warning that further tax rises would mean “slower growth” for working people.² The shared diagnosis is that pressures are rising; the dispute is over whether fiscal discipline, targeted support, tax policy or energy supply should carry most of the response.