Economy update: UK GDP to soar by 1.6% and outpace Europe as Reeves vows to 'go further in growth mission'
Economist Julian Jessop says Rachel Reeves has "crashed the economy"
GB NEWS
The UK economy is set to grow by 1.6 per cent in 2025, according to fresh projections from the International Monetary Fund (IMF). The global economic body has upgraded its growth forecast for Britain from the 1.5 per cent it predicted in October last year.
This improved outlook comes amid a turbulent start to 2025 for London's financial markets, which have grappled with concerns over potential stagflation, but is a much-needed relief for Chancellor Rachel Reeves.
Both borrowing costs and the pound have stabilised in recent days, helped by slowing inflation rates in the UK and US. The latest figures will provide welcome news for Reeves, who has faced economic challenges in the early weeks of the year.
The IMF revealed that Britain's economy grew by just 0.9 per cent in 2024, falling short of its earlier prediction of 1.1 per cent. The downward revision follows recent data from the Office for National Statistics showing weaker-than-expected growth of 0.1 per cent in November.
This modest increase came after a 0.1 per cent decline in October. The economy showed no growth during the third quarter of 2024. Looking ahead, the IMF predicts the UK economy will maintain its 1.6 per cent growth in 2025, before slightly moderating to 1.5 per cent in 2026.
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The UK's economy appears to be turning a corner in win for the Chancellor, the latest IMF report has found
GETTY / PA
Britain is expected to outperform several major European economies over the next two years, with growth rates surpassing those of Germany, France and Italy. The positive outlook positions the UK favourably among its European peers, according to the IMF's World Economic Outlook report.
In the latest forecasts from the IMF, global economic growth of 3.3 per cent is predicted for both 2025 and 2026, representing a 0.1 percentage point upgrade for this year.
"Global growth is expected to remain stable, albeit lacklustre," the IMF report stated. The stronger-than-expected performance is attributed to predicted growth in the United States.
Global inflation is projected to decline to 4.2 per cent this year and 3.5 per cent next year, moving closer to central bank targets. The IMF noted this trend will enable further normalisation of monetary policy.
Rachel Reeves is on a mission to grow the UK economy
PA"This will help draw to a close the global disruptions of recent years, including the pandemic and Russia's invasion of Ukraine, which precipitated the largest inflation surge in four decades," the report added.
Following this forecast, Reeves welcomed the IMF's prediction, highlighting Britain's position among major economies and he reiterated her mission to bolster the UK's economic standing.
"The UK is forecast to be the fastest growing major European economy over the next two years and the only G7 economy, apart from the US, to have its growth forecast upgraded for this year," she said.
The Chancellor pledged to accelerate her economic agenda in response to the positive outlook. "I will go further and faster in my mission for growth through intelligent investment and relentless reform," she stated.
She emphasised her commitment to improving living standards across the nation. The Chancellor added that she would "deliver on our promise to improve living standards in every part of the UK through the plan for change."
This morning, the FTSE 100 rose to its highest level ever recorded, surpassing the previous record set in May last year. London's top index soared more than one per cent on Friday morning to reach 8,480.57, surpassing the previous peak of 8,474.41.
LATEST DEVELOPMENTS:
High inflation and interest rates have been a weight on the UK economy in recent years GETTY Currently, the stock market is up 3.5 per cent since the start of the year, rising. Mining companies led this rally, with Antofagasta, Glencore and Anglo-American among the biggest gainers on the FTSE.
Notably, housebuilders posted strong performance, with Persimmon, Taylor Wimpey and Barratt Redrow posting significant rises. The construction sector's gains were also of note, with companies like Persimmon, Taylor Wimpey, Barratt Redrow and Berkeley Group being bolstered.
The market is beginning to price in multiple interest rate cuts from the Bank of England later in the year, with the Monetary Policy Committee (MPC) due to meet again on February 6, 2025.
As it stands, the nation's base rate sits at 4.75 per cent. The central bank has raised rates in an attempt to rein in inflation but MPC members have voted for cuts as the CPI rate has fallen.
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