United Kingdom: 2025 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for United Kingdom

The 2025 Article IV Consultation with the United Kingdom discusses that the new government has launched bold reforms since taking office in July 2024. The efforts go in the right direction, but delivering on this agenda is challenging in a highly volatile global environment and with limited fiscal space. Economic activity is projected to gradually recover, driven by private consumption. The disinflation process is expected to continue despite a temporary uptick in inflation. The authorities’ fiscal plans are growth-friendly and appropriately accommodate spending pressures and investment needs, while raising revenue to safeguard fiscal sustainability. The gradual approach to policy easing continues to be appropriate, along with the transition to a demand-driven repo-based framework. Work should continue on strengthening the Bank of England’s forecasting and communication capacity, in line with the recommendations of the Bernanke Review. The authorities’ ‘Growth Mission’ focuses on the right structural areas and is well aligned with past IMF recommendations, such as fostering policy stability, easing planning restrictions, and boosting skills. Prioritization, sequencing, and continued clear communication will be key to ensure quick wins and buy-in.