The figures are a blow to the Labour Government which has made raising living standards a priority.
Chancellor Rachel Reeves (Image: Getty)
Rachel Reeves is facing another headache as UK living standards are forecast to rise more slowly than nearly any other major economy in 2026. The International Monetary Fund (IMF) warns that growth in GDP (gross domestic product) per capita, which is often used to measure average living standards, will be only 0.5% next year as the Chancellor admitted there could be tax rises in next month’s budget.
The UK has the worst forecast out of the whole G7 in a blow to Labour which has made raising living standards a priority. The forecast is below that of the United States (1.8%), Canada (1.6%), Japan (1.2%) and the Eurozone (0.9%). Among the world’s major economies, only South Africa’s GDP per person is expected to grow more slowly than Britain’s, according to the IMF.
Rachel Reeves said she is aware the economy feels “stuck” to some people (Image: Getty)
Labour has set an ambition for the UK to have the highest GDP per capita growth in the G7 over consecutive years by the end of the parliament.
It has dropped in the UK over the last two years as rising inflation has seen the population grow at a faster rate than the economy, per The Telegraph.
UK inflation is set to surge to the highest in the G7 in 2025 and 2026, according to the IMF which warned prices in Britain are climbing at a faster rate than in nations such as Senegal and Peru.
The IMF increased its UK growth forecast for this year but reduced its prediction for 2026 amid concerns over the labour market.
Britain is set to be the second fastest growing G7 country this year, the IMF also said, with only the US growing faster.
Director of the IMF’s research department, Pierre-Olivier Gourinchas, said this showed the UK was “doing something right”.
In response, Ms Reeves, who has arrived in Washington DC for the annual IMF and World Bank Conference, said: “This is the second consecutive upgrade to this year’s growth forecast from the IMF. But I know this is just the start. For too many people, our economy feels stuck.”
In an interview with Sky News, the Chancellor acknowledged she was looking at potential tax rises and spending cuts to fill a black hole in her Budget which she partly blamed on the lingering impact of Brexit.
Ms Reeves said “of course, we’re looking at tax and spending” as she prepares for her November 26 statement.
