Chancellor Rachel Reeves may take some comfort from the IMF’s latest assessment of the global economy, but the headline figures offer little to celebrate.
In its World Economic Outlook, the Washington-based institution warned that Britain is likely to be among the hardest hit by the unfolding global trade war, and that inflation is now expected to rise faster than previously forecast.
The IMF cut its UK growth forecast for 2025 from 1.6% to 1.1%, citing higher government borrowing costs, weak household consumption, and elevated energy prices.
Inflation is now expected to hit 3.1% next year, 0.7 percentage points higher than previously projected, leaving the Bank of England under pressure as it weighs interest rate cuts against stubborn price rises.
While the UK economy is exposed due to its openness to global trade, the IMF said the root of the slowdown lies in deepening tensions between the US and China.
With the world’s two largest economies now accounting for 43% of global output, higher tariffs on both sides are expected to ripple through global supply chains.
Reeves, who travels to Washington this week for the IMF spring meetings, will attempt to secure relief from the 10% blanket tariff the US has applied to all UK goods, along with a 25% levy on steel, aluminium, and cars
But the IMF has cautioned that even if the UK wins a reprieve, the overall impact on British GDP will be limited. A previous government estimate put the long-term benefit of a comprehensive US trade deal at just 0.16%.