Less money, lower living standards and higher taxes... this is what the IMF's bombshell new UK growth forecast could mean for you: JOHN-PAUL FORD ROJAS

When the International Monetary Fund predicts the UK will be hit by slower growth and rising inflation, it might seem like the distant number crunching of ivory tower economists in Washington DC.

Unfortunately, however, this is likely to have real world implications for millions of ordinary Britons.

The Fund, in its latest World Economic Outlook has slashed its forecast for growth in the UK economy for this year by 0.5 per cent to 1.1 per cent.

Behind the dry numbers, lower growth means we are all going to be a bit less wealthy than we may have hoped.

The Fund is predicting higher inflation than it previously expected for the UK, largely as a result of higher energy bills plopping through our letter boxes.

UK inflation is predicted to speed up from 2.5 per cent in 2024 to 3.1 percent this year, before falling back to 2.2 per cent next year – still above the Bank of England’s target, of 2 per cent.

That means Britons will have less money in their pockets to spend and that living standards won’t be getting much better any time soon.

What’s more, the implications for Chancellor Rachel Reeves and Bank of England governor Andrew Bailey could spell tough times for taxpayers and borrowers.

That is because slower growth means lower tax revenues flowing into the Treasury’s coffers – and that makes it harder for Ms Reeves to balance the books.

In turn, this could spell higher taxes or lower spending to make the sums add up when she delivers her next Budget in the autumn.

Higher taxes would come as a bitter blow to individuals and firms, as the country is already groaning under the biggest burden since the aftermath of the Second World War.

That is bad enough, but the Fund warns that the recent turmoil seen by pension savers and investors is unlikely to be over.

After Trump announced his sweeping tariff package, stock markets tanked and bond markets went into meltdown, prompting him into a 90-day freeze.

The Fund says ‘divergent and rapidly shifting policy stances or deteriorating sentiment could trigger additional repricing of assets’. In plain English, Trump could easily spook the markets again, sending your share portfolio downwards and upsetting the bond markets that underpin the world financial system.

For the Bank of England, the pressure is on to cut interest rates to cushion the economy from any slowdown.

Currently, markets see a quarter-point interest rate cut next month as a certainty, and as many as three more on top of that by the end of the year.

That would help mortgage borrowers and businesses who need loans to invest and grow.

But if – as the IMF fears – the inflation outlook is worse, the Bank may be hesitant.

The Bank previously hiked interest rates sharply as it sought to bring rampant double-digit inflation under control.

So, Mr Bailey and his colleagues will be reluctant to go too fast in cutting them if they fear the genie of spiralling prices could be let out of the bottle again.

If interest rates do remain higher for longer it will act as a drag on confidence, business investment and the housing market.

Having said all that, it’s worth noting that the pain for Britain is not unique. Some of the slowdown in growth can certainly be attributed to Trump’s tariffs, which will hit UK exports.

Britain’s growth outlook is being pulled down along with much of the rest of the world because of the bombshell impact of the tariffs unleashed by the President.

The tariffs, apart from making it harder to sell things to American consumers, add to the uncertainty for businesses thinking about investment and jobs.

But some of the pain is certainly self-inflicted. Reeves’s national insurance hike and Ed Miliband’s madcap green energy policies are undoubtedly making a bad situation worse.

As IMF economist Pierre-Olivier Gourinchas put it: ‘Tariffs are playing a role as they are in most countries ,and uncertainty is also playing a role as it is in all countries and its weighing down on growth in the UK.

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‘But there are some are UK specific factors, and in terms of the 0.5 percentage point downward revision, the domestic factors are probably the biggest ones.’

He pointed to weaker growth and a rise in long-term interest rates. On inflation, he said the predicted rise ‘is coming from domestic factors, in particular, regulated energy prices.

Trump’s tariffs – and those announced by other countries in retaliation – are now at levels not seen for a hundred years.

But in today’s globalised economy with supply chains criss-crossing every continent, it means more.

Everything from the smartphone you browse to the clothes you wear will have travelled thousands of miles before it gets to you.

‘Unlike in the previous century, the global economy is now characterized by a high degree of economic and financial integration, with supply chains and financial flows criss-crossing the world, whose potential unwinding could constitute a major source of economic upheaval,’ says the IMF.

In other words, chucking a Trump-shaped spanner into the world economy will have big consequences for everyone.