Britain's economic prospects have been downgraded more than any other major economy in the International Monetary Fund's latest update on the state of the world.

In a blow to the Chancellor Rachel Reeves, who heads out to the IMF for its latest meetings in Washington DC this week, the fund slashed its 2026 UK GDP growth forecast from 1.3% to 0.8%. The 0.5 percentage point cut is greater than for any of the other G7 group of seven leading industrialised nations, and comes hot on the heels of a similar downgrade from the OECD.

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The UK was hardly alone in seeing a downgrade in its projections for gross domestic product - the broadest measure of economic performance. In the face of the war in the Persian Gulf, the fund downgraded a swathe of other nations, as well as its overall global growth projection (which, it said, it would have raised were it not for the war).

"The global economy has, to date, withstood a series of shocks," the fund said, "yet another one - this time a military conflict engulfing the Middle East since the end of February - is testing this resilience."

However, what is striking about both this and the OECD economic updates from recent weeks is how badly the UK fares. This is thought in part to derive from Britain's dependence on energy imports, its sensitivity to import prices and its comparatively high levels of government debt, which leave it with less room than many other nations to cushion the economic blow for households.

The fund said: "In the United Kingdom, the war and a slower pace of monetary easing mean that growth is projected to decline from 1.3% in 2025 to 0.8% in 2026, a downward revision of 0.5 percentage points relative to the October 2025 forecast. Growth is projected to recover to 1.3% in 2027, slower than expected before the war as the impact of higher energy prices linger."

It also said that Britain would see higher inflation than most other developed economies this year, with the rate of annual price growth averaging 3.2% across 2026. The report said: "Inflation, which in 2025 increased partly because of one-off changes in regulated prices, is expected to pick up again temporarily toward 4% before returning to target by the end of 2027 as the effects of higher energy prices fade and a weakening labour market continues to exert downward pressure on wage growth."

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The fund said it expected global growth of 3.1% this year, down from its previous forecast of 3.3%, and below the 3.4% it would have anticipated were it not for the war. Although down sharply on the previous forecast, and below the 2.3% expected in the US, the UK growth of 0.8% is only slightly weaker than France's 0.9% and is identical to Germany's 0.8% forecast.

Responding to the announcement, Ms Reeves said: "The war in Iran is not our war, but it will come at a cost to the UK. These are not costs I wanted, but they are costs we will have to respond to.

"I have vowed that my economic approach to this crisis will be both responsive to a changing world and responsible in the national interest, keeping inflation and interest rates in check to protect households and businesses," she said.

"We entered this conflict in a stronger position because of the choices this government took to build economic stability, but there is more to do."

(c) Sky News 2026: Britain's economic prospects downgraded more than any other major economy