# UK economic growth and fiscal outlook

> Live situation record from CLSTR: https://clstr.news/situations/uk-economic-growth-and-fiscal-outlook
> Updated: 2026-10-16T11:20:57.000Z. Sources: 35. Developments: 3.

The United Kingdom’s economic outlook has seen shifts in growth projections and fiscal scrutiny. In September 2026, KPMG projected UK growth of 1.3% for 2026 and 1.4% for 2027, though it warned that rising energy bills and slow wage growth could slow momentum. This period was marked by rising wholesale gas prices linked to conflict in Iran, which threatened to increase the Ofgem energy price cap and potentially prompt the Bank of England to raise interest rates.

By mid-October 2026, the International Monetary Fund (IMF) upgraded the UK’s 2026 growth forecast to 1.3%, representing one of the largest upgrades within the G7. This upgrade follows data showing the UK economy grew by 0.1% in August, defying forecasts of a contraction. This expansion was driven by a 0.8% surge in the production sector, including a 1.2% rise in manufacturing and significant contributions from the computer programming sector, though the services sector remained flat and construction contracted by 0.2%. Over the three months leading to August, GDP expanded by 0.7%.

Despite these improvements, fiscal concerns persist. The IMF urged the government to “stay the course” in reducing the budget deficit, projecting the deficit will shrink to 1.4% of GDP by 2031. However, the IMF cautioned that the UK’s tax burden is projected to rise faster than in any other Western economy. Additionally, the Resolution Foundation noted that living standards remain a concern, with GDP per capita projected to grow by only 0.7% this year. These developments occur as Chancellor John Healey prepares for the Autumn Budget on October 28.

## Claims

- The UK economy grew by 0.1% in August. (corroborated by 11 sources)
- The construction sector contracted by 0.2% in August. (corroborated by 9 sources)
- Production output increased by 0.8% in August. (corroborated by 8 sources)
- The services sector recorded no growth in August. (corroborated by 8 sources)
- The IMF raised its 2026 UK economic growth forecast to 1.3%. (corroborated by 6 sources)
- The IMF urged the UK government to maintain efforts to strengthen public finances. (corroborated by 6 sources)
- UK GDP grew by 0.7% in the three-month period ending in August. (corroborated by 6 sources)
- The UK tax burden is projected to rise faster than any other Western economy. (single source)

## Timeline

### 2026-10-16: UK economic growth forecast upgraded by IMF

The IMF has upgraded the UK's growth forecast to 1.3 per cent, though GDP per capita growth remains low at 0.7 per cent. Chancellor Healey has reportedly rejected calls to equalize Capital Gains and Income Tax.

2 sources. https://clstr.news/cluster/uk-economic-growth-forecast-upgraded-by-imf

### 2026-10-13: UK economy grows 0.1% in August, defying contraction forecasts

The UK economy grew unexpectedly by 0.1% in August, driven by a surge in production, despite flat services and a decline in construction. The IMF raised its 2026 growth forecast to 1.3%.

31 sources. https://clstr.news/cluster/uk-budget-deficit-on-decline-says-bank-of-england-governor

### 2026-09-20: UK and global economies face growth amid rising energy costs

The UK economy is forecast to grow by 1.3% in 2026 despite rising energy costs, while the UN raises global growth projections amid warnings of renewed inflation risks from high oil prices.

2 sources. https://clstr.news/cluster/uk-and-global-economies-face-growth-amid-rising-energy-costs

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Cite as: UK economic growth and fiscal outlook. CLSTR, https://clstr.news/situations/uk-economic-growth-and-fiscal-outlook