London Daily

Focus on the big picture.
Thursday, Oct 30, 2025

UK economy to avoid recession but inflation still a worry, IMF says

UK economy to avoid recession but inflation still a worry, IMF says

The British economy will avoid falling into recession this year, according to upgraded growth forecasts Tuesday from the International Monetary Fund.
In its latest assessment of the UK economy, the Washington-based fund said domestic demand had proven more resilient than anticipated in the face of the surge in energy costs.

The IMF now thinks the British economy will grow by a still-modest 0.4 percent this year partly as a result of higher wages, up from its previous prediction just a month ago of a 0.3 percent decline. The more positive projection came alongside warnings of a “subdued” outlook for growth and the threat posed by ongoing global uncertainty.

IMF Managing Director Kristalina Georgieva said at a press briefing in London that the latest assessment reflects “favorably” on the UK in comparison to other countries in the Group of Seven leading industrial nations.

“We are likely to see the UK performing better than Germany, for example,” she said.

Despite the more upbeat assessment, the IMF said inflation is likely to remain stubbornly high over the coming years and only return to the Bank of England’s target of 2 percent in mid-2025, six months longer than it predicted earlier this year.

Like other central banks, the Bank of England has been raising interest rates aggressively over the past 18 months or so to a 15-year high of 4.5 percent after inflation spiked sharply, first because of bottlenecks caused by the coronavirus pandemic and then Russia’s invasion of Ukraine, which sent energy and food prices surging.

Figures on Wednesday are expected to show inflation in Britain falling back below 10 percent for the first time since August, largely because the sharp spike in prices caused by the invasion of Ukraine will fall out of the annual comparison.

Andrew Bailey, governor of the Bank of England, told lawmakers on Tuesday that inflation had “turned the corner.”

The IMF also praised the British government for reestablishing credibility following the “stress episode” of last September’s big tax cuts of the short-lived government of former Prime Minister Liz Truss.

That mini-budget led to a sharp increase in borrowing costs and fears about the viability of some pension funds as financial markets questioned the government’s unfunded tax cuts.

Truss’ premiership soon came to an end and the Conservative Party promoted Rishi Sunak to take the helm. He and his Treasury chief, Jeremy Hunt, made it their priority to restore faith in Britain’s finances by reversing those tax cuts and tightening spending.

Hunt said the IMF report vindicated the government’s efforts to “restore stability” but that the “job is not done yet.”

With a general election set to take place next year and the Conservatives trailing heavily in the opinion polls, the pressure is mounting on Sunak to cut taxes, a course that IMF cautioned against taking.

“Of course, it is attractive to look into ways in which the tax burden is lighter, to inject more investment opportunity,” Georgieva said. “But only when it is affordable — and at this point of time, neither it is affordable nor it is desirable.”
Newsletter

Related Articles

0:00
0:00
Close
UK and Vietnam Sign Landmark Migration Deal to Fast-Track Returns of Irregular Arrivals
UK Drug-Pricing Overhaul Essential for Life-Sciences Ambition, Says GSK Chief
Princesses Beatrice and Eugenie Temporarily Leave the UK Amid Their Parents’ Royal Fallout
UK Weighs Early End to Oil and Gas Windfall Tax as Reeves Seeks Investment Commitments
UK Retail Inflation Slows as Shop Prices Fall for First Time Since Spring
Next Raises Full-Year Profit Guidance After Strong Third-Quarter Performance
Reform UK’s Lee Anderson Admits to 'Gaming' Benefits System While Advocating Crackdown
United States and South Korea Conclude Major Trade Accord Worth $350 Billion
Hurricane Melissa Strikes Cuba After Devastating Jamaica With Record Winds
Vice President Vance to Headline Turning Point USA Campus Event at Ole Miss
U.S. Targets Maritime Narco-Routes While Border Pressure to Mexico Remains Limited
Bill Gates at 70: “I Have a Real Fear of Artificial Intelligence – and Also Regret”
Elon Musk Unveils Grokipedia: An AI-Driven Alternative to Wikipedia
Saudi Arabia Unveils Vision for First-Ever "Sky Stadium" Suspended Over Desert Floor
Amazon Announces 14 000 Corporate Job Cuts as AI Investment Accelerates
UK Shop Prices Fall for First Time Since March, Food Leads the Decline
London Stock Exchange Group ADR (LNSTY) Earns Zacks Rank #1 Upgrade on Rising Earnings Outlook
Soap legend Tony Adams, long-time star of Crossroads, dies at 84
Rachel Reeves Signals Tax Increases Ahead of November Budget Amid £20-50 Billion Fiscal Gap
NatWest Past Gains of 314% Spotlight Opportunity — But Some Key Risks Remain
UK Launches ‘Golden Age’ of Nuclear with £38 Billion Sizewell C Approval
UK Announces £1.08 Billion Budget for Offshore Wind Auction to Boost 2030 Capacity
UK Seeks Steel Alliance with EU and US to Counter China’s Over-Capacity
UK Struggles to Balance China as Both Strategic Threat and Valued Trading Partner
Argentina’s Markets Surge as Milei’s Party Secures Major Win
British Journalist Sami Hamdi Detained by U.S. Authorities After Visa Revocation Amid Israel-Gaza Commentary
King Charles Unveils UK’s First LGBT+ Armed Forces Memorial at National Memorial Arboretum
At ninety-two and re-elected: Paul Biya secures eighth term in Cameroon amid unrest
Racist Incidents Against UK Nurses Surge by 55%
UK Chancellor Rachel Reeves Cites Shared Concerns With Trump Administration as Foundation for Early US-UK Trade Deal
Essentra plc: A Closer Look at a UK ‘Penny Stock’ Opportunity Amid Market Weakness
U.S. and China Near Deal to Avert Rare-Earth Export Controls Ahead of Trump-Xi Summit
Justin time: Justin Herbert Shields Madison Beer with Impressive Reflex at Lakers Game
Russia’s President Putin Declares Burevestnik Nuclear Cruise Missile Ready for Deployment
Giuffre’s Memoir Alleges Maxwell Claimed Sexual Act with Clooney
House Republicans Move to Strip NYC Mayoral Front-Runner Zohran Mamdani of U.S. Citizenship
Record-High Spoiled Ballots Signal Voter Discontent in Ireland’s 2025 Presidential Election
Philippines’ Taal Volcano Erupts Overnight with 2.4 km Ash Plume
Albania’s Virtual AI 'Minister' Diella Set to 'Birth' Eighty-Three Digital Assistants for MPs
Tesla Unveils Vision for Optimus V3 as ‘Biggest Product of All Time’, Including Surgical Capabilities
Francis Ford Coppola Auctions Luxury Watches After Self-Financed Film Flop
Convicted Sex Offender Mistakenly Freed by UK Prison Service Arrested in London
United States and China Begin Constructive Trade Negotiations Ahead of Trump–Xi Summit
U.S. Treasury Sanctions Colombia’s President Gustavo Petro over Drug-Trafficking Allegations
Miss USA Crowns Nebraska’s Audrey Eckert Amid Leadership Overhaul
‘I Am Not Done’: Kamala Harris Signals Possible 2028 White House Run
NBA Faces Integrity Crisis After Mass Arrests in Gambling Scandal
Swift Heist at the Louvre Sees Eight French Crown Jewels Stolen in Under Seven Minutes
U.S. Halts Trade Talks with Canada After Ontario Ad Using Reagan Voice Triggers Diplomatic Fallout
Microsoft AI CEO: ‘We’re making an AI that you can trust your kids to use’ — but can Microsoft rebuild its own trust before fixing the industry’s?
×