IMF Executive Board Concludes 2025 Article IV Consultation with United Kingdom
IMF News, July 25, 2025
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- Published: July 25, 2025
Overview
- On July 21, the Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for the United Kingdom.
- Press Release date on the page: July 25, 2025.
- Key judgment: An economic recovery is underway, with policy messages focused on staying the course on fiscal consolidation, gradual and flexible monetary easing, and prioritizing structural reforms.
Growth and inflation projections
- Growth is projected at 1.2 percent in 2025 and 1.4 percent in 2026.
- Average CPI is projected to decline from 3.2 percent in 2025 to 2.3 percent in 2026.
- Forecast assumption: global trade tensions lower the level of UK GDP by 0.3 percent by 2026 (all else equal), due to continued uncertainty, slower activity in UK trading partners, and the direct impact of remaining US tariffs on the UK.
- Drivers of the projected recovery: monetary easing, positive wealth effects, an uptick in confidence, a boost to public spending in the October budget, and a pickup in private consumption supported by business investment.
Recent economic developments
- The economy rebounded in Q1 2025 after weaker growth in the second half of 2024; the growth recovery in Q1 was mainly driven by business investment.
- Headline inflation eased to 1.7 percent in September, then picked up again in the fall mainly because of waning effects from lower energy prices.
- Wage growth continued to moderate as the labor market showed signs of easing.
- Monetary policy has remained restrictive despite the gradual reduction in Bank Rate.
- The stance of fiscal policy was broadly unchanged in FY2024/25 relative to the previous year.
Risks to the outlook
- Downside risks to growth include:
- Tighter-than-expected financial conditions combined with rising precautionary saving by households.
- Persistent global trade uncertainty weakening world activity, disrupting supply chains, and undermining private investment.
- A significant rise in commodity prices intensifying inflationary pressures.
- Directors viewed domestic and global risks, including those stemming from trade tensions, as being tilted to the downside.
Fiscal policy assessment and recommendations
- Assessment: The authorities’ fiscal plans strike a good balance between supporting growth and safeguarding fiscal sustainability; the medium-term fiscal strategy appropriately supports growth while stabilizing net debt.
- Recommendation: It will be important to stay the course and deliver the planned deficit reduction over the next five years; reducing fiscal deficits as planned over the medium term may require additional measures if risks materialize.
- Additional advice: Continue efforts to improve spending efficiency and address long-term pressures from ageing population, defense spending and climate transition.
- Governance and framework: Directors welcomed recent improvements to the fiscal framework and supported further refinements to improve predictability and reduce pressures for frequent policy changes.
Monetary policy and financial sector assessment
- Monetary policy guidance: The Bank of England (BoE) should continue to ease monetary policy gradually, while remaining flexible in light of elevated uncertainty.
- Directors agreed a gradual and flexible approach to monetary easing remains appropriate and retaining flexibility to adjust the monetary stance in either direction is warranted.
- BoE institutional developments welcomed: implementation of the Bernanke Review, shift toward scenario‑based communication, conditional guidance, improved forecasting, and the transition to a demand‑driven repo‑based framework to mitigate balance sheet risks while maintaining monetary control.
- Financial stability: The financial sector remains broadly resilient and macroprudential settings are appropriate.
- Recommendations: Enhance gilt market resilience amid rising global risks; continue assessing and reducing vulnerabilities in the non‑bank sector; further strengthen the AML/CFT framework; balance growth-promoting reforms with preserving financial stability.
Structural reforms and priorities
- Assessment: The authorities’ Growth Mission covers the right areas to lift productivity.
- Recommendation: Given the breadth of the agenda, careful prioritization and sequencing of structural reforms, along with clear communication, will be key to success.
- Priorities highlighted by Directors: policy stability, planning reforms, and boosting human capital as likely to deliver the largest growth benefits.
- Multilateral cooperation: Directors commended the authorities for continued support of multilateral cooperation.
Selected economic indicators (highlights from table)
- Real GDP growth: 2019: 1.6; 2020: -10.3; 2021: 8.6; 2022: 4.8; 2023: 0.4; 2024: 1.1; 2025: 1.2; 2026: 1.4; 2027: 1.5.
- Domestic demand (2019–2025 sequence where provided): 1.9; -11.5; 9.1; 5.1; 0.0; 2.4; 1.8.
- CPI, period average (selected years): 2019: 0.9; 2020: 2.6; 2021: 7.3; 2022: 2.5; 2023: 3.2; 2024: 2.3; 2025: 2.0.
- CPI, end-period (selected entries shown): 2019: 0.6; 2020: 5.4; 2021: 10.5; 2022: 4.0; 2023: 2.9.
- Unemployment rate (ILO, percent): 2019: 3.8; 2020: 4.6; 2021: 4.1; 2022: 4.3; 2023: 4.5; 2024: 4.4; 2025: 4.2.
- Gross national saving (percent of GDP): 2019: 15.6; 2020: 14.6; 2021: 17.2; 2022: 16.6; 2023: 14.3; 2024: 15.0; 2025: 13.1; 2026: 13.2; 2027: 13.5; 2028: 13.7; 2029: 13.9.
- Public sector overall balance (fiscal year, percent of GDP): 2019: -2.6; 2020: -15.1; 2021: -5.3; 2022: -5.0; 2023: -4.8; 2024: -4.7; 2025: -4.1; 2026: -3.5; 2027: -2.8; 2028: -2.3; 2029: -1.9.
- Public sector primary balance (percent of GDP): 2019: -1.3; 2020: -14.1; 2021: -3.2; 2022: -1.2; 2023: -1.7; 2024: -1.1; 2025: -0.6; 2026: 0.2.
- Public sector net financial liabilities (PSNFL, percent of GDP): 2019: 74.5; 2020: 83.2; 2021: 80.5; 2022: 81.1; 2023: 81.5; 2024: 82.9; 2025: 84.0; 2026: 84.1; 2027: 83.9; 2028: 83.4.
- Nominal GDP (billions GBP): 2019: 2,234; 2020: 2,103; 2021: 2,285; 2022: 2,526; 2023: 2,711; 2024: 2,851; 2025: 2,981; 2026: 3,089; 2027: 3,203; 2028: 3,321; 2029: 3,447; 2030: 3,575.
- Nominal GDP (billions USD): 2019: 2,853; 2020: 2,699; 2021: 3,144; 2022: 3,125; 2023: 3,371; 2024: 3,645.
IMF Executive Board Concludes 2025 Article IV Consultation with United Kingdom — July 25, 2025.