UK economy to grow faster but households face sharper inflation rise

Summarised from 4 outlets · 5 reports · Updated 13 Oct, 03:14 · Archive

The IMF forecasts faster UK economic growth this year but predicts inflation will rise more sharply than previously expected.

The International Monetary Fund has revised up its forecast for UK economic growth this year while simultaneously warning that households will face sharper inflation than previously predicted. The IMF said consumer prices are set to increase by 3.3 per cent in 2026, up from an earlier forecast of 3.2 per cent, driven by escalating energy and food costs linked to conflict in the Middle East.

This revised inflation rate would mark the joint second-highest among G7 countries, with only the United States suffering a higher rate this year. The IMF said that inflation will remain above the Bank of England's two per cent target for the seventh year running. For 2027, inflation is expected to slow to 2.8 per cent, though this is significantly higher than the 2.4 per cent previously forecast.

On the more positive side, the IMF upgraded its growth forecast for UK gross domestic product to 1.3 per cent for 2026, with growth slowing to 1.2 per cent in 2027. This represents an upward revision of 0.3 percentage points for 2026 compared to July forecasts, though 2027 growth was downgraded from 1.3 per cent. UK growth will remain higher than most European peers, second only to the United States among major economies.

The IMF warned that prolonged or worsening conflict in the Middle East could keep energy and food prices elevated and volatile, dampening economic expansion and weakening government fiscal positions. These risks could be further amplified by extreme weather, cyber attacks and targeted strikes on energy infrastructure. The Institute for Fiscal Studies echoed these concerns, noting that inflation will erode government department budgets, potentially necessitating large cuts to public services or spending top-ups totalling tens of billions of pounds ahead of the Budget on 28 October.

How it is being reported

• UK households to face sharper rise in inflation than previously thought, IMF warnsPrime Minister Andy Burnham is also now expected to see UK economic growth slow down next year, according to fresh forecastsThe Independent · 13 Oct, 03:00
• UK economy to suffer second-highest inflation in G7The UK economy will suffer the second highest inflation of any G7 country over the next two years, the International Monetary Fund has warned, putting Chancellor John Healey’s efforts to ease the cost of living at risk. In its latest report published today, the global finance body has said that inflation will remain above the [...]City AM · 13 Oct, 03:00
• UK households to see higher-than-expected inflation as energy prices jump – IMFPrime Minister Andy Burnham is also now expected to see UK economic growth slow down next year, according to fresh forecasts.Evening Standard · 13 Oct, 03:00
• UK households to see higher-than-expected inflation as energy prices jump – IMFPrime Minister Andy Burnham is also now expected to see UK economic growth slow down next year, according to fresh forecasts.Independent Business · 13 Oct, 03:00
• UK economy to grow more than expected - but households face sharper rise in inflation, IMF saysThe UK economy is set to grow faster than expected this year, though households are expected to face higher rates of inflation, according to forecasts from the International Monetary Fund (IMF).Sky News · 13 Oct, 01:16

In this story: International Monetary Fund · Bank of England · United Kingdom · United States · Middle East · John Healey · Institute for Fiscal Studies

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