Britain to Experience Fastest Growth in Europe

By Suban Abdulla

LONDON (Reuters) – Britain is set to have the fastest growth among major European economies this year, according to the International Monetary Fund (IMF). This news comes as a boost to Finance Minister Rachel Reeves, who faces pressure due to a slowdown since her party took power in July.

On Friday, the IMF raised its growth forecast for Britain in 2025 by 0.1 percentage points to 1.6%, securing its position as the third-strongest within the Group of Seven (G7) advanced economies, following the United States and Canada.

The IMF maintained its outlook for British gross domestic product (GDP) growth at 1.5% for 2026, once again ranking it third-fastest in the G7, consistent with its estimate from October.

In response to the upgraded forecast for 2025, Reeves stated she would “go further and faster” to achieve economic growth. The Bank of England also forecasts 1.5% growth in 2025, partly due to a temporary increase in public spending announced by Reeves on October 30.

Additionally, last month, the Organisation for Economic Cooperation and Development (OECD) raised its growth forecast for Britain from 1.2% to 1.7%.

However, Reeves’ spending plans rely on forecasts from the government’s Office for Budget Responsibility, which projected 2% growth for 2025 and 1.8% for 2026.

On Monday, British government 30-year borrowing costs reached their highest point since 1998, mainly due to a global bond selloff fueled by inflation and borrowing concerns under the incoming presidency of Donald Trump.

Nevertheless, British bond prices bounced back later that week, aided by weaker-than-expected British and U.S. inflation data, as well as slower-than-expected GDP growth in November, the first month post-Reeves’ budget plan.

Reeves, whose future has been under scrutiny from opposition lawmakers, reaffirmed her budget decisions on Friday, asserting they were made in the national interest to stabilize public finances.

Britain’s economy stagnated in the third quarter of 2024, largely due to uncertainty surrounding the Labour government’s budget affecting companies. The Bank of England estimated there was zero growth in the final quarter of 2024 as well.