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The UK economy will grow more than previously thought, according to the International Monetary Fund (IMF), which has upgraded its latest forecast.

But it warned trade tensions linked to US tariff plans will reduce UK economic growth next year.

The Washington-based UN financial agency said the UK economy will expand 1.2% this year and “gain momentum next year”.

The upgrade in forecasts, however, is slight, up from an expected 1.1% announced in April as the world reeled from the global trade war sparked by US President Donald Trump’s tariffs.

That April figure was a 0.5% downgrade from the projected 1.6% growth for 2025 the IMF foresaw in January and the 1.5% forecast issued in October.

It means the IMF expects the UK economy to grow less this year than it forecast in October and January.

Money blog: Britons face 100% property tax in Spain

Tariffs warnings

This anticipated lower growth is largely due to tariffs – taxes on goods imported to the United States – and the uncertainty caused by shifting trade policy in the US, the world’s largest economy.

While many tariffs have been paused until 8 July, it’s unclear if deals will be in place by then and if pauses may be extended.

The effect of this has been quantified as a 0.3 percentage points lower growth by 2026 in the UK, the IMF said.

The organisation held its prediction that the UK economy will grow by 1.4% in 2026.

“The forecast assumes that global trade tensions lower the level of UK GDP by 0.3% by 2026, due to persistent uncertainty, slower activity in UK trading partners, and the direct impact of remaining US tariffs on the UK,” it said.

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Trump’s tariffs: What you need to know

It comes despite the UK having agreed a deal with the Trump administration to circumvent the 25% tariffs on cars and metals.

The IMF also cautioned that “weak productivity continues to weigh on medium-term growth prospects”.

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Interest rates “should” continue to come down, making borrowing cheaper, though the IMF acknowledged the rate-setters at the Bank of England now have a “more complex” job due to the recent rise in inflation and “fragile” growth.

The author of the report on the UK Luc Eyraud said the IMF expected the Bank to cut interest rates by 0.25 percentage points every three months until they reach a level of around 3%, down from the current 4.25%.

Praise was given to the UK government as the IMF said “fiscal plans strike a good balance between supporting growth and safeguarding fiscal sustainability”.

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The news is being taken as a win by Chancellor Rachel Reeves.

“The UK was the fastest growing economy in the G7 for the first three months of this year and today the IMF has upgraded our growth forecast,” she said.

“We’re getting results for working people through our plan for change – with three new trade deals protecting jobs, boosting investment and cutting prices, a pay rise for three million workers through the national living wage, and wages beating inflation by £1,000 over the past year.”

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Why are prisoners being released by mistake?

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Why are prisoners being released by mistake?

👉 Click here to listen to Electoral Dysfunction on your podcast app 👈

Who is to blame for two more inmates being wrongly freed from prison? The Conservatives attempted a mic drop moment with David Lammy this week by trying to get the justice secretary to admit to it live in the House of Commons.

So why did Lammy avoid the question five times? And when 262 prisoners were released by mistake in the year to March – how is this happening every week?

At the very least, Harriet sees the saga as an opportunity for the government to sort out the prison service.

Plus Beth, Ruth and Harriet are joined by pollster Luke Tryl, and a group of voters who tell us why they’re not convinced by the prime minister so far.

So how tricky is this budget going to be for Rachel Reeves when most people’s top worry is the cost of living? Can she actually put up taxes? And will more people just end up supporting Nigel Farage and Zack Polanski?

Remember, you can also watch Beth Rigby, Harriet Harman and Ruth Davidson on YouTube.

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Mistaken prison releases could be ‘opportunity’ for justice secretary, Harriet Harman says

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Mistaken prison releases could be 'opportunity' for justice secretary, Harriet Harman says

Multiple mistaken prisoner releases could actually be an “opportunity” for David Lammy, Harriet Harman has said.

Speaking to Sky News’ Electoral Dysfunction podcast with political editor Beth Rigby, the Labour peer said the release errors are a chance for the justice secretary to “roll up his sleeves” and sort out his department.

It emerged on Wednesday that two prisoners were wrongly freed from HMP Wandsworth last week. It follows the high-profile release of migrant sex offender Hadush Kebatu from HMP Chelmsford.

Baroness Harman said this has “shone a spotlight on a systemic problem which needs to be sorted out”.

Rather than become a “ding dong” between Labour and the Tories, she said: “I think ironically it’s a bit of an opportunity for him [Lammy] to actually be able to roll up his sleeves and insist the department gets the resources and the focus it needs to sort out this problem, which is not a new problem.”

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What’s wrong with our prisons?

She added that figures showing 262 prisoners were mistakenly released in the 12 months to March 2025 is “five a week, more or less being let out early” and “we don’t even know that is the full extent”.

Mr Lammy, who is also the deputy prime minister, is under fire over his handling of the saga.

More on David Lammy

He stood in for Sir Keir Starmer at PMQs on Wednesday when he refused to answer whether any more asylum seekers had been wrongly released since Kebatu, an Ethiopian national, who was later deported.

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Lammy says he didn’t want to ‘mislead’ the Commons or public

As PMQs was ending, the story broke that Algerian sex offender Brahim Kaddour-Cherif had been released in error. It has since emerged that Mr Lammy was made aware of this overnight on Tuesday.

He has defended not revealing that he knew about the incident, saying he did not have the full details and did not want to mislead the public.

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Mr Lammy is also being criticised as following Kebatu’s mistaken release, he promised on 27 October that stronger prison checks would be introduced immediately.

Brahim Kaddour-Cherif and William Smith
Pic: Met Police/Surrey Police
Image:
Brahim Kaddour-Cherif and William Smith
Pic: Met Police/Surrey Police

But Kaddour-Cherif was released in error two days later, on 29 October, while another prisoner, William “Billy” Smith, was mistakenly released on Monday.

Smith handed himself in on Thursday, while Kaddour-Cherif is still on the run.

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Starmer says Lammy ‘setting out facts to best of his knowledge’ on prisoner releases

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Starmer says Lammy 'setting out facts to best of his knowledge' on prisoner releases

Sir Keir Starmer has said David Lammy “set out the facts” on mistaken prisoner releases “to the best of his knowledge” amid questions over what the justice secretary knew and when.

Speaking for the first time since it emerged two prisoners were wrongly freed from HMP Wandsworth, the prime minister also said the situation was “intolerable” and that he was “angry and frustrated”.

The Met Police announced on Wednesday afternoon that registered sex offender Brahim Kaddour-Cherif, an Algerian national, had been released in error on 29 October. He is still at large.

A few hours later it was revealed another prisoner, 35-year-old William “Billy” Smith, had been wrongly released on Monday – the same day he was convicted for multiple fraud offences and handed a 45-month jail term. He has since handed himself in.

Asked how the public can have confidence in the justice system, Sir Keir said: “Let me just say how angry and frustrated I am that these mistakes have been made in releasing people. They’re intolerable, and they shouldn’t be made.

“A lot of it comes from the burden and the strain on the system because of the failures of the last government. But I recognise it’s our job to step up and to fix this.”

More on David Lammy

Sir Keir went on to defend Mr Lammy’s handing of the saga, which comes a week on from the mistaken release of Ethiopian sex offender Hadush Kebatu, who has since been deported.

Mr Lammy declared on 27 October that stronger prison checks in light of the Kebatu fiasco would come into force immediately.

But on Thursday, he said those checks were not in place when Kaddour-Cherif was released two days later.

Asked whether he was being truthful last week or on Thursday, Sir Keir said: “David Lammy can speak for himself on that.

“I’m absolutely clear that he’s setting out the facts, to the best of his knowledge and that’s the right thing for him to do.

“But whatever the checks, it’s intolerable. So, we have to make sure that whatever changes are needed are made.”

Government sources have said the mistakes that triggered the release of Kaddour-Cherif happened at the end of September, before the new regime was put in place.

Meanwhile on Thursday night, the Ministry of Justice (MoJ) announced the rollout of “cutting-edge technology to more prisons” in order to reduce human error and modernise “the archaic processes that have led to mistakes”.

“These measures will build on the tough new checks that were brought in last month, and ensure governor oversight of all releases,” the MoJ said.

Mr Lammy, who is also the deputy prime minister, is facing further criticism for failing to reveal that he knew of Kaddour-Cherif’s release during PMQs on Wednesday, when he was filing in for Sir Keir who is at the COP summit in Brazil.

He was asked repeatedly by Tory leader Kemi Badenoch whether any more asylum seekers had been wrongly released since Kebatu and refused to answer the question. The news broke at the end of PMQs.

On Thursday, Mr Lammy said he did not have all the details in the morning and did not want to mislead the public.

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Lammy: didn’t want to mislead House on prisoner release

He told broadcasters: “I took the judgment that it is important when updating the House and the country about serious matters like this, that you have all of the details.

“I was not equipped with all of the detail, and the danger is that you end up misleading the House and the general public.

“So that is the judgment I took. I think it’s the right judgment.”

But shadow justice secretary Robert Jenrick said: “David Lammy has either lied or has absolutely no clue what’s going on in his department.

“How can the public have confidence in the justice secretary when he can’t establish a timeline of events or answer basic questions?”

Kaddour-Cherif was serving a sentence at HMP Wandsworth for trespass with intent to steal, but had previously been convicted for indecent exposure.

It is understood he is not an asylum seeker but is in the process of being deported after he overstayed his visa.

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