Britain To Be Fastest Growing Major European Economy

Growth in Britain is set to outstrip every other major European economy next year, the International Monetary Fund has predicted, in a sharp bounce back from the recession in 2023.

The UK’s GDP will grow by 0.7pc this year, the IMF said, upgrading the forecast from its previous prediction of 0.5pc after government statisticians described the economy as “going gangbusters” in the early months of this year.

In 2025, growth will more than double to 1.5pc.

That is faster than the 1.3pc projected for Germany and France next year, and the 0.9pc anticipated in Italy.

Such strong growth figures will boost the new Labour Government, though the 1.5pc projected for next year - and so covering the period without any Conservative rule - have not been upgraded.

However it means that, for now, the UK is still falling short of Labour’s manifesto pledge “to secure the highest sustained growth in the G7”, as the US and Canadian economies are even faster.

Rachel Reeves, the Chancellor, said: “While it’s welcome that the IMF is forecasting growth to pick up this time, I am under no illusion to the scale of the challenge facing the economy and the inheritance this new government faces. That is why we are already taking the tough decisions to fix the foundations of our economy, so we can rebuild Britain and make every part of our country better off.”

Germany’s outlook has not been upgraded at all. It is set to eke out an expansion of just 0.2pc this year as the industrial power struggles to recover from 2023’s contraction.

“Continued weaknesses in manufacturing suggest a more sluggish recovery in countries such as Germany,” the IMF said, even as the eurozone as a whole benefits from falling inflation and rising wages.

So far this year “shoots of economic recovery materialised in Europe, led by an improvement in services activity”.

Among the wider G7, Britain will also outpace Japan’s anticipated growth of 1pc for 2025, coming in behind only the US - at 1.8pc - and Canada, which is leading the way with an expansion of 2.4pc.

But there are risks. Lingering inflation means interest rates may have to be cut more slowly than borrowers hope, the IMF said, or even rise further to ensure price pressures are completely under control.

And the watchdog cautioned that Governments, including the US, are borrowing dangerously heavily which builds up risks for the future.