Rachel Reeves’s master plan in tatters – has no idea how to fix it | Personal Finance | Finance

The International Monetary Fund has delivered another blow to our flailing Chancellor, slashing growth forecasts in response to Donald Trump’s trade war.

In January, the IMF expected the global economy to grow by 3.3% in 2025.

That projection has now been cut to just 2.8% and the picture is even worse for the UK.

Britain’s 2025 growth forecast has been slashed by almost a third, from 1.6% to just 1.1%. Next year, GDP will grow a meagre 1.4%, which is 0.1% less than previously anticipated.

Labour’s hopes of getting the UK economy to growth now lie shattered. Again.

The IMF pinned the blame on “recent tariff announcements, an increase in gilt yields and weaker private consumption amid higher inflation”.

Our GDP forecast is only marginally higher than the eurozone, which the IMF forecasts will grow just 0.9% in 2025.

Germany faces a torrid time, as the IMF cut its growth forecast from 0.3% to zero.

The US is forecast to grow faster despite being at the centre of the tariff storm, rising 1.8% in 2025. But that’s down from the previously forecast 2.7%.

IMF chief economist Pierre-Olivier Gourinchas warned: “We are entering a new era as the global economic system that has operated for the last 80 years is being reset.”

The IMF is bracing for more volatility if tariff tensions escalate. That’s the last thing Reeves – or the rest of us – need.

The UK was finally starting to grow in the months before last July’s election but Reeves destroyed that with her tax and spend budget in October.

That left her with just £9.9billion of fiscal headroom, which was quickly wiped out as the UK ground to a halt.

She gave herself the same wafer thin margin in her Spring Statement, and now Trump has erased that.

The Office for Budget Responsibility sounded the alarm last month, halving UK growth projections from 2% to 1%.

In February, it was the turn of the Bank of England, which halved its own forecast from 1.5% to 0.75%.

Today’s IMF downgrade simply confirms what everyone already feared.

That puts Reeves in an even tighter spot.

If growth weakens further, she may have to either raise taxes or slash spending in this year’s Autumn Budget. Both will trigger fury among hard-pressed Britons.

Her third option is to rewrite her own fiscal rules, but she has already ruled that out. At least for now.

The fact that other economies are also feeling the strain is no consolation. Britain is deeply entwined in global trade, and shocks elsewhere will be felt here too.

This heaps still more pressure on Reeves and PM Keir Starmer to secure a trade deal with the US. If that happens, there may be a path to recovery.

But even then, Britain will still feel the collateral damage from Trump’s wider trade conflict with China, which is only just beginning.

I’m not sure Reeves ever had a plan. She certainly hasn’t got one now.