Labour’s promise to make Britain the fastest-growing economy in the G7 has come under serious doubt, according to a major report by the International Monetary Fund (IMF). The global financial watchdog revealed that while the UK is set to outperform its European G7 peers in the near term, it still trails behind the US and Canada in projected growth.
According to the IMF’s updated World Economic Outlook, the UK economy is expected to grow by 1.2% in 2025 and 1.4% in 2026. In contrast, the US is forecasted to grow by 1.9% and 2.0% over the same period, while Canada is expected to see growth of 1.6% and 1.9%.
Although this places the UK ahead of Germany, France, Italy, and Japan, which are all facing weaker growth, it casts doubt on Labour’s bold economic growth pledge. Shadow Chancellor Rachel Reeves welcomed the IMF’s recognition that Britain is leading European G7 nations in growth but faces mounting pressure to deliver on her broader economic agenda.
Despite some positive forecasts, the UK still faces serious challenges. Inflation remains the highest in the G7 at 3.6%, and government borrowing costs are also the highest among the group, placing additional strain on public finances.
The IMF also anticipates two more interest rate cuts from the Bank of England this year, with the first likely next week. These cuts come amid broader economic pressures, including the £40 billion in tax increases announced in Reeves’ first Budget last October. More tax hikes could be on the way this autumn as the government seeks to fund ambitious spending plans while trying to maintain fiscal discipline.
Conservative business spokesperson Andrew Griffith criticized Labour’s approach, calling the government’s economic strategy “schizophrenic.” He argued that despite talking about growth, Labour’s tax and regulatory policies are stifling it.
Across Europe, the IMF projects sluggish growth. Germany is expected to grow just 0.1% in 2025 and 0.9% in 2026, after shrinking for two years. France and Italy face similarly weak prospects, with growth forecasts of 0.6% and 0.5% in 2025.
The eurozone outlook is further clouded by a controversial new trade deal with the US. Under the agreement, EU goods face a 15% tariff when entering the US—better than the previously threatened 30%, but still worse than the 10% levy applied to UK goods under its post-Brexit arrangements.
The IMF noted that the global economy has shown resilience despite ongoing uncertainty. However, it warned that increasing trade barriers could hurt growth, and geopolitical tensions—from the wars in Ukraine and the Middle East—pose risks to global supply chains and commodity prices.
Still, the IMF said growth could improve if international trade becomes more predictable and tariffs are reduced. It urged policymakers to focus on stability, fiscal prudence, and long-term reforms.
Responding to the report, Chancellor Reeves said: “The IMF forecasts show the UK is still the fastest-growing economy in Europe within the G7, despite global challenges. Our Plan for Change is investing billions into jobs, transport, affordable housing, and major infrastructure like Sizewell C to drive growth and improve living standards.”
