The latest assessment comes as rising household energy bills place further pressure on living costs. Although the British economy has performed better than previously expected this year, the IMF has warned that prolonged disruption to global energy supplies could affect prices, employment and economic activity.
Energy and Food Costs Drive Higher UK Inflation Forecasts
According to the IMF’s October 2026 World Economic Outlook, UK consumer price inflation is expected to reach 3.3% this year, compared with its previous forecast of 3.2%. That would place Britain joint second among G7 countries for the highest inflation rate.
The organisation expects inflation to ease to 2.8% in 2027, although this remains above its earlier estimate of 2.4%. The revised figures reflect continuing pressure from energy and food costs linked to the conflict in the Middle East. Figures from the Office for National Statistics showed that UK inflation reached 3.1% in August. Further increases are anticipated over the coming months as higher household energy bills feed through to consumer prices.
The Bank of England has indicated that inflation could rise to slightly above 4% during the first quarter of 2027, partly because of another increase in the household energy price cap in January. It expects inflation to decline during the remainder of the year.
The IMF also warned that prolonged fighting or further escalation in the Middle East could keep energy and food prices elevated and volatile. Attacks on energy infrastructure, cyber attacks and extreme weather could intensify those pressures. Globally, consumer price inflation is expected to reach 4.7% in 2026 before easing to 4.1% in 2027. The organisation identified higher commodity prices as a major factor behind the increase.
UK Growth Outlook Weakens Despite Stronger Economic Performance
Britain’s economic growth has proved more resilient than previously anticipated, according to the IMF. Its latest forecasts put UK gross domestic product growth at 1.3% in 2026, compared with an earlier estimate of 1%. Growth is expected to slow to 1.2% in 2027, below the organisation’s previous forecast of 1.3%. Rising prices and continued disruption linked to the Middle East conflict remain significant pressures on economic activity.
The IMF also revised its UK unemployment forecast downwards to 5.3% for this year, from 5.6%, indicating that the labour market has experienced a smaller shock than previously expected. Investment in artificial intelligence has helped support economic activity internationally, offsetting some of the effects of geopolitical disruption. The IMF nevertheless warned that the benefits have been unevenly distributed across countries and industries.
Speaking to reporters, IMF economic counsellor Silvana Tenreyro urged Britain to maintain its fiscal consolidation plans. “The message for the UK is just simply stay the course and continue on that trajectory,” she said.
Chancellor John Healey described Britain’s economy as resilient despite international conflicts, pointing to its position among the faster-growing G7 economies in 2026. Shadow chancellor Andrew Griffith called for greater domestic energy production and reductions in welfare spending, warning against further tax increases.
The IMF’s wider assessment emphasised the need for governments to maintain fiscal discipline while providing temporary, targeted support to households most exposed to rising living costs.
