Rachel Reeves cannot just blame Donald Trump for Britain’s faltering economic performance, the International Monetary Fund warned yesterday – as it slashed its growth forecast for the UK. In a brutal verdict on Labour’s economic record, it said domestic factors had played the ‘biggest role’ in its decision to downgrade its UK growth forecast. The Washington-based agency lowered this to just 1.1 per cent – down by 0.5 percentage points since the start of the year. It also warned that the UK now faces the highest inflation in the G7, deepening the cost-of-living crisis which Labour vowed to end. The Chancellor last night tried to deflect the blame for the worsening outlook, suggesting that Mr Trump’s ‘Liberation Day’ tariffs were the driving factor. She said the report ‘clearly shows that the world has changed’. But IMF chief economist Pierre-Olivier Gourinchas said domestic factors such as surging utility bills and higher government borrowing costs in the wake of Ms Reeves’s autumn Budget were the UK’s biggest problems. He added: ‘Tariffs are playing a role, as they are in most countries, and uncertainty is also playing a role, as it is in all countries, and it’s weighing down on growth in the UK. But there are UK-specific factors, and in terms of the 0.5 percentage point downward revision, the domestic factors are probably the biggest ones.’ Shadow Chancellor Mel Stride described the IMF’s findings as a ‘worrying indictment of Labour’s economic approach’. He added: ‘Less than a year into its government, Britain is already seeing the consequences of Labour’s high-tax, high-spend agenda. The IMF raises serious concerns about the lack of confidence and direction under Labour. At a time when families are looking for stability and support, Labour’s policies are stifling growth, pushing up the cost of living and leaving us vulnerable to external shocks.’ In a bleak report, the IMF’s estimate for global GDP growth were also lowered by 0.5 percentage points to 2.8 per cent. Last night, Ms Reeves travelled to Washington, where she will make the case for global free trade and use talks with US Treasury Secretary Scott Bessent to try to secure a trade deal that could ease tariffs on UK exporters. Instead of acknowledging the report’s negatives, she noted that the IMF forecast ‘shows that the UK is still the fastest-growing European G7 country’. Weak growth presents her with a headache as she tries to meet her fiscal targets without having to hike taxes or cut spending at her next Budget in the autumn. The IMF report comes after Mr Trump’s tariff announcements sparked global market turmoil – including a rise in the cost of UK borrowing as yields on government bonds, known as gilts, climbed. The IMF blamed the UK downgrade on ‘recent tariff announcements, an increase in gilt yields and weaker private consumption amid higher inflation’. Mr Gourinchas said other factors included ‘a lower carry-over from weaker growth in the second half of last year, and some tightening of financial conditions as longer-term interest rates have risen’. While the IMF did not directly cite Labour’s decision to hike National Insurance Contributions for employers or increase the minimum wage, those policies are also expected to squeeze growth and push up inflation. The Fund’s forecast also paints a worrying picture for the cost of living. Tax hikes and price increases for water, energy and other public services – partly driven by the climate-change agenda – are expected to lead to a sharp 0.7 percentage point rise in inflation to 3.1 per cent this year. This will make it harder for the Bank of England to deliver the interest-rate reductions required to boost consumer confidence, the housing market and business investment. Despite the growth downgrade, Britain is still predicted to be way ahead of competitors in Germany, France and Italy, which will stagnate in 2025, with no signs of any significant upturn until 2026. But the UK’s growth prospects over the next two years were cut by more than any leading European nation.