Chancellor John Healey has pledged to protect the UK economy’s resilience in the 28 October Budget as conflict in the Middle East and Ukraine drives up energy prices and government borrowing costs.

Speaking at the IMF annual meetings in Bangkok, Healey said the UK had demonstrated resilience, with the IMF upgrading its growth forecast for 2026. The UK’s borrowing is expected to fall to its lowest level in six years, with the country forecast to have the lowest budget deficit in the G7 by 2029.

The Chancellor identified economic growth, crisis preparedness and international development finance as priorities for cooperation.

Healey said: "The UK economy is resilient and my Budget will protect Britain’s resilience through this turbulent time. Conflict in the Middle East and Ukraine is hitting people and around the world, pushing up energy prices and the cost of government debt.

"Britain and our allies can face these challenges together. I will work with international partners to keep trade moving, strengthen resilience and deliver good growth for all. Fiscal discipline is the foundation for supporting families and businesses today, and building hope for the future."

He also pledged to explore how AI could support productivity and growth while addressing barriers to adoption and managing its risks, calling for greater international cooperation to strengthen economic resilience, support growth and address the challenges posed by AI.

The IMF has raised its average 2027 inflation forecasts for G7 economies by almost 0.8% compared with last year’s assessment, while cutting its growth forecasts by an average of nearly 0.1% against its January projections.

The UK will use its G20 presidency in 2027 to advance discussions on AI’s implications for growth and employment, economic resilience and support for developing economies. The G20 finance ministers and central bank governors will meet in Edinburgh on 8 and 9 July, ahead of a leaders’ summit in Manchester.

Separately, Lloyds Bank expects the energy price shock to worsen the Office for Budget Responsibility’s fiscal forecasts, increasing the Government’s borrowing requirement in the current and next financial years.

In its report published Friday, the bank estimates that an additional £15bn could be added to the Debt Management Office’s financing remit for 2026-27, comprising £5bn from Treasury bills and £10bn from gilts, without requiring additional auctions.

Lloyds also forecasts that the Chancellor’s fiscal headroom against the Government’s rules could fall from £24bn to £19bn by 2029-30 as the impact of higher energy costs is incorporated. It expects £5bn of tax increases to help limit the deterioration.

Looking further ahead, the bank anticipates that the Prime Minister’s ten-year plan will include significant public sector reform, with potential announcements on defence spending, social care, welfare and nationalisation. However, it warned that the costs of these commitments could threaten the Government’s limited fiscal headroom and leave public finances vulnerable to further shocks.

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