TL;DR
The International Monetary Fund now expects the UK economy to grow 1.3% in 2026, half a percentage point more than it forecast in April, and credits AI-related investment and exports for much of the improvement, the Financial Times reports. Only Germany among G7 economies has seen a comparable upgrade since the spring. The Fund trims 2027 to 1.2%, below the 1.6% the Office for Budget Responsibility assumed in March, and warns that an energy shock from the Iran war is about to push inflation up again. A day earlier the same institution warned that an AI share correction could spread worldwide.
What the IMF said
The World Economic Outlook, published on Tuesday 13 October, describes a global picture that is “highly uneven across countries”, in chief economist Silvana Tenreyro’s words, with “technology-related exports and investments” cushioning some economies against geopolitical turmoil. Britain is among them. The BBC notes the 1.3% figure is also up from the 1% the Fund pencilled in as recently as July.
The upgrade reflects recent data: GDP grew 0.5% in the second quarter after 0.6% in the first. The FT reports that economists increasingly read this year’s numbers as resilience rather than the familiar pattern of a spring spurt fading into autumn, pointing to a sharp rise in business investment concentrated in data centres, hardware, software and infrastructure, and strong output in professional services, consultancy and programming, the sectors advising on AI adoption.
The caveats
The chancellor, John Healey, welcomed the forecast as evidence of “strong international resilience”, and the IMF expects the UK to run the smallest G7 deficit by 2031. But Tenreyro also warned that global resilience “is reaching its limits”. Barclays’ chief UK economist, Jack Meaning, told an Institute for Fiscal Studies event that continued tech investment could make “a material contribution” to growth, while dearer money and higher inflation in the UK would probably slow the AI boom, and that only a lasting jump in productivity, not the investment itself, would lift the long-term growth rate.
The UK business reading
In our view the forecast and this week’s other data describe the same economy from different angles. Deloitte’s survey of UK CFOs, out on Wednesday, found domestic economic and political uncertainty the biggest constraint on competitiveness and cost cutting the top priority, even as 52% expect AI to reduce headcount within a year. And the IMF’s own Global Financial Stability Report, published a day earlier, listed an AI share correction among the risks most likely to tighten financial conditions. The investment driving the upgrade is also the exposure.
Looking forward
Healey delivers his first Budget with a growth upgrade behind him and an inflation bump ahead. Whether AI-related investment survives higher rates, as Meaning doubts, will decide whether 2026 is a step up or another spurt.