United Kingdom: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for United Kingdom

2024ARTICLE IV CONSULTATION—PRESS RELEASE;STAFF REPORT; AND STATEMENT BY THE EXECUTIVEDIRECTOR FORUNITED KINGDOM Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussionswith members, usually every year. In the context of the2024Article IV consultation withtheUnited Kingdom, the following documents have been released and are included in thispackage: •APress Releasesummarizing the views of the Executive Board as expressed during itsJuly 1, 2024consideration of the staff report that concluded the Article IV consultationwiththeUnited Kingdom. •TheStaff Reportprepared by a staff team of the IMF for the Executive Board’sconsideration onJuly 1, 2024, following discussions that ended onMay 21, 2024, withthe officials oftheUnited Kingdomon economic developments and policies. Based oninformation available at the time of these discussions, the staff report was completedonJune 14, 2024. •AnInformational Annexprepared by the IMFstaff. •AStaff Statementupdating information on recent developments. •AStatement by the Executive DirectorfortheUnited Kingdom. The documents listed below have been or will be separately released. Selected Issues TheIMF’s transparency policy allows for the deletion of market-sensitive information andpremature disclosure of the authorities’ policy intentions in published staffreports andother documents. Copies of this report are available to the public from International Monetary Fund•Publication ServicesPO Box 92780•Washington, D.C. 20090Telephone: (202) 623-7430•Fax: (202) 623-7201E-mail:publications@imf.org Web:http://www.imf.org International Monetary FundWashington, D.C. IMF Executive Board Concludes 2024Article IV Consultationwiththe United KingdomFOR IMMEDIATE RELEASE Washington, DC–July1,2024:The Executive Board of the International Monetary Fund(IMF) concluded the Article IV consultation1withtheUnited Kingdom. The economy is approaching a soft landing, with growth recovering faster than expected aftera mild technical recession in 2023.Inflation has fallen rapidly to near-target from last year’sdouble-digit levels, due to the reversal of the energy price shock and the demand impact oftight monetary policy. Growth is projected at a modest 0.7 percent in 2024, strengthening to1.5 percent in 2025, as disinflation buoys real incomes, monetary policy starts easing, andfinancial conditions become more accommodative. Fiscal policy has remained tight, continuingto target medium-term debt stabilization, although the last two budgets did include tax cutsaimed at boosting investment and labor supply. Inflation is forecast to temporarily rise fromaround 2 percent presently to 2.5 percent by end-2024, due to regulated energy price baseeffects, before returning durably to 2 percent in early 2025. Longer-term growth prospects remain subdued, due to weak labor productivity growth,population aging and somewhat higher than expected inactivity levels due to long term illness,only partly offset by higher migration numbers. Elevated pressures on public services, notablyin health, amidst ongoing industrial action over pay, imply additional headwinds. A number ofwell-conceived measures to boost weak productivity have also been implemented, but thesewill not be sufficient to lift productivity to close to pre-GFC levels. Post-Brexit uncertainty hascontinued to ease, in the context of progress on Irish border arrangements, a careful review ofretained EU laws, and resilience in UK services exports. However, UK firms trading with the EUare still adapting to the post-Brexit arrangement. Risks to growth and inflation are balanced. In the short term, growth could be lower if theanticipated pick-up in consumption from current weak levels does not materialize, or higher inthe event of stronger-than-expected second round effects from falling energy prices (this alsorepresents a downside risk to inflation). Alternatively, stronger wage pressures could lendgreater persistence to services inflation, with possible repercussions for growth as monetarypolicyadjusts. The key downside risk to medium-term growth is that productivity and laborsupply disappoint relative to expectations. But bold implementation of ambitious structuralreforms and AI adoption similarly present an upside risk to growth. ExecutiveBoard Assessment2 Executive Directors recognized that the economy is approaching a soft landing, withgrowth recovering after a mild technical recession last year and set to accelerate further in2025, as disinflation boosts real incomes and financial conditions ease. Directors welcomed therapid decline in inflation since last summer due to easing energy and goods prices, althoughnoted that wage growth and services inflation pressures remain elevated. They agreed thatrisks to the outlook are balanced. Directors agreed that with the monetary policy stance reaching a turning point, therisks of premature versus delayed easing should be appropriately balanced. They welcomedthe Monetar