The International Monetary Fund warned on Tuesday that Britain would face the biggest hit to growth of all the world’s richest economies due to the Iran war.
In its latest World Economic Outlook, the IMF estimated that the UK economy will now grow by just 0.8% in 2026, down from a 1.3% forecast for 2025.
This is the largest cut in growth of any G7 economy, with the UK set to lag behind the US, which is projected to grow 2.3% in 2026, as well as the euro zone (1.1%), Spain (2.1%), France (0.9%).
The IMF said that after the trade and tariff turmoil last year, the global economy now faces a major test as a result of the ongoing war in the Middle East. It warned that a prolonged conflict could worsen the scenario, while rising public debt and diminishing credibility of institutions risk causing further damage.
“Prolonged or widespread conflict, worsening geopolitical fragmentation, a reassessment of expectations around artificial-intelligence-driven productivity, or renewed trade tensions could undermine growth and destabilize financial markets,” the IMF said.
“Promoting adaptability, maintaining credible policy frameworks, and strengthening international cooperation is essential to respond to current shocks while preparing for future disruptions in an increasingly uncertain global environment.”
