Labour's fastest G7 growth aim undermined by IMF report

Labour’s pledge to make Britain the fastest growing economy in the G7 is lying in tatters, according to a leading global watchdog. In a major report published today, the International Monetary Fund said the UK is lagging behind Donald Trump’s America and Canada.

EU members of the G7 are faring even worse – compounding the bloc’s misery as it reels from a lopsided trade deal with the US that has left it with worse terms than Brexit Britain. Germany, France and Italy, as well as Japan, will all grow less than the UK over the next two years, according to the IMF. Reeves welcomed that Britain would be the fastest growing European economy in the G7.

The IMF also predicted the Bank of England will cut interest rates twice more this year – with the first move expected to come next week. But Britain does hold some unwanted records, with inflation in the UK the highest in the G7 at 3.6 per cent. While failing to keep up with the US and Canada, the UK government’s borrowing costs on the international bond markets are also higher than in any other G7 nation – piling further strain on the Chancellor and the creaking public finances.

The IMF report comes as businesses and households are battered by the £40billion of tax rises announced by Rachel Reeves (pictured) in her first Budget in October last year. It is feared further painful tax hikes are coming this autumn as the Chancellor struggles to pay for Labour’s lavish spending plans and balance the books. Tory business spokesman Andrew Griffith said: ‘There is a complete schizophrenia in the economic policy of this government. They talk growth but from tax raids to piling on regulations, their actions are the opposite. No wonder growth is failing.’

In an update to its World Economic Outlook, the IMF said it expects the UK economy to grow by 1.2 per cent this year and 1.4 per cent in 2026. That compares with growth of 1.9 per cent and 2 per cent in the United States and 1.6 per cent and 1.9 per cent in Canada, which is now led by former Bank of England governor Mark Carney (pictured). However, it does outstrip growth in the major European economies, with Germany on course to expand by just 0.1 per cent this year and 0.9 per cent next having shrunk in 2023 and 2024.

France is set for growth of 0.6 per cent and 1 per cent while the IMF pencilled in 0.5 per cent and 0.8 per cent for Italy. The outlook for the eurozone remains particularly grim and comes amid a backlash over last weekend’s trade deal with the US that left the EU worse off than Brexit Britain. The agreement subjects the EU to 15 per cent tariffs on most of its goods entering America – lower than the 30 per cent previously threatened but worse than the 10 per cent levy on UK goods. The IMF said the global economy was showing ‘resilience amid persistent uncertainty’. It warned the introduction of higher tariffs ‘could lead to weaker growth’ while ‘elevated uncertainty could start weighing more heavily on activity’.

And with Russia’s war in Ukraine and conflict in the Middle East ongoing, the report added: ‘Geopolitical tensions could disrupt global supply chains and push commodity prices up.’ However, noting that the world economy has fared better than expected so far this year, the IMF said: ‘Global growth could be lifted if trade negotiations lead to a predictable framework and to a decline in tariffs. Policies need to bring confidence, predictability, and sustainability by calming tensions, preserving price and financial stability, restoring fiscal buffers, and implementing much-needed structural reforms.’

Ms Reeves said: ‘The IMF’s forecasts show that the UK remains the fastest growing European economy in the G7 despite the global economic challenges we are facing. However, I am determined to unlock Britain's full potential, which is why we are investing billions of pounds through our Plan for Change - in jobs through better city region transport, record funding for affordable homes, as well as backing major projects like Sizewell C to drive economic growth and put more money into people's pockets.’