George Osborne has last laugh as IMF upgrades UK growth prospects

Britain’s growth prospects were sharply upgraded today by the International Monetary Fund as it hailed increasing confidence among consumers and firms.

In a new report, it awarded the UK a bigger improvement in outlook than any other country during the past three months.

The Treasury said the economy was “turning a corner” but cautioned that there was no room for complacency. But the IMF’s comments were deeply satisfying to Chancellor George Osborne who just months ago found his austerity policies slammed as “playing with fire” by the international body’s chief economist, Olivier Blanchard.

Mr Osborne was also boosted by a raft of positive news on buoyant manufacturing activity, a recovering jobs market and rising house prices.

The IMF World Economic Outlook now predicts 1.4 per cent growth for the UK this year, up from the 0.9 per cent it forecast in July.

The scale of the improvement — 0.5 percentage points — outstripped Eurozone competitors, the US and Japan and contrasted with wobbling emerging economies such as China and India, where prospects have weakened over the summer and prompted the IMF to lower its global growth estimate from 3.2 per cent to 2.9 per cent.

“In the United Kingdom, recent data have shown welcome signs of an improving economy, consistent with increasing consumer and business confidence, but output remains well below its pre-crisis pea,” said the IMF. Britain’s growth spurt is predicted to continue into next year, when the economy is pencilled in to expand at a faster 1.9 per cent pace than the 1.5 per cent predicted in July.

It came as the British Chambers of Commerce’s latest survey of 7,000 businesses showed employment in the UK’s dominant services sector at its highest level since 2007 and confidence in turnover and profits soaring above pre-recession levels between July and last month.

But the rapid improvement in the economy has also fuelled concerns over the government’s Help to Buy scheme encouraging a boom in house prices.

Rob Wood, chief economist at Berenberg bank, said: “The housing market is a growing risk for the UK, not because of where prices are today — the market is recovering from a depressed level — but because of where prices could be in a couple of years’ time.”