IMF upgrades outlook for UK as AI drives growth spurt

The IMF’s October World Economic Outlook lifts UK GDP growth to 1.3% in 2026 — up 0.5pp from April (implying April was 0.8%) — and casts Britain as one of the winners of the tech boom. For 2027 it forecasts 1.2%, a slight downgrade from April (old figure not given) and below the OBR’s March forecast of 1.6%. The fund links the upgrade to AI-related investment and exports: business investment concentrated in software, hardware, data centres and infrastructure, with output growing in programming, consultancy and professional services. Germany is the only other G7 economy whose outlook improved as much since April, also via exporters gaining from the AI build-out; no euro-area, France or US figures appear in the article. UK GDP grew 0.5% in Q2 2026 and 0.6% in Q1. Silvana Tenreyro (IMF chief economist): the outlook is “highly uneven across countries”; “technology-related exports and investments give some countries a cushion”. Chancellor John Healey cited “strong international resilience”; the IMF expects the UK to have the lowest G7 deficit by 2031. Caveats: the upgrade comes despite an Iran-war energy shock that has lasted longer than expected, and a fresh burst of inflation lies ahead; Tenreyro warns “resilience is reaching its limits”; past UK growth spurts at the start of the year have faded by autumn; Jack Meaning (Barclays) says higher rates and inflation are likely to slow the AI boom and that long-run growth needs a productivity step-change, not just a capex boost.