The International Monetary Fund (IMF) has upgraded its UK growth forecast for 2026 to 1.3%, an increase of 0.5 percentage points. This represents the joint-largest upgrade among G7 countries.
The Fund also forecasts a significant reduction in borrowing, with the deficit projected to fall to 1.4% of GDP by 2031. However, when considering GDP per capita, which is a key measure for living standards, the UK's growth is anticipated to be 0.7% this year.
Separately, the Resolution Foundation has published its analysis ahead of the upcoming Budget, highlighting that borrowing is expected to be around £10 billion a year higher than in Spring, primarily due to increased debt interest costs. The organisation estimates that the fiscal rule's wiggle room to balance day-to-day spending with tax in 2029-30 will halve from £24 billion to £12 billion.
The Resolution Foundation also estimates that a typical family is £2,900 worse off than they would have been without the cost of living crisis. With energy bills forecast to rise to nearly £2,000 a year in January, and almost one-in-five households in the poorest half of the country already behind on priority bills, there is an expectation of greater support in the Budget.