The International Monetary Fund updated its 2025 economic growth prediction for the UK to show a reduced growth rate of 1.1%, down from the earlier 1.5% projection.
The UK faces ongoing financial challenges from disrupted trade flows, reduced investment and declining consumer confidence that led to the downgrade.
The announcement raises concerns about the nation’s economic prospects amid global and internal instability.
New IMF Projections
The IMF’s revised projections identify the UK as one of the poorest performers among G7 countries for 2025.
Growth expectations have been substantially decreased due to delayed recovery, sustained inflationary pressures and reduced confidence.
The IMF now predicts UK GDP growth of 1.0% in 2024 and 1.1% in 2025, down from earlier forecasts that assumed a stronger post-pandemic, post-Brexit recovery.
Drivers of Lower Growth
Trade Headwinds
Post-Brexit trade tensions, customs barriers and regulatory differences have hampered export performance compared to other developed nations.
Investment Trends
High interest rates and doubts about future growth have caused businesses to hold back on significant capital investments.
Consumer Spending
Higher energy bills, rising food prices and increased mortgage costs have eroded disposable incomes despite inflation easing.
UK Government Reaction
Chancellor Jeremy Hunt defended the focus on controlling inflation and maintaining fiscal restraint as essential for stability.
Bank of England Governor Andrew Bailey echoed that current measures will lay the groundwork for a sustainable medium-term recovery.
Analyst Perspectives
Dame DeAnne Julius
She warned the UK remains an outlier among developed economies due to structural issues post-Brexit and urged reforms to boost competitiveness.
Dr Paul Dales
He highlighted the labour market’s strength and easing inflation pressures but cautioned that downside risks still outweigh potential gains.
Impact on Markets
Gilt yields rose slightly as investor worries about UK growth and fiscal health increased.
The FTSE 100 held steady, balanced by international sector gains, while sterling fell 0.5% against the dollar and 0.3% versus the euro.
What Comes Next
The UK’s growth outlook hinges on tackling trade barriers, boosting productivity and restoring consumer confidence.
The IMF may revise forecasts again if inflation proves stickier or global disruptions intensify.
