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Good morning. Today we're talking about new UK growth forecasts, NatWest’s government exit and KFC’s UK expansion.

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Big Stories

UK growth upgrade

The International Monetary Fund (IMF) has delivered a welcome upgrade to the UK's economic growth forecast for 2025, now projecting 1.2% growth, up from its earlier estimate of 1.1%. This modest revision signals that an "economic recovery is underway," building on a stronger-than-expected first quarter. The IMF anticipates further momentum, with growth reaching 1.4% in 2026. This positive outlook follows a period of economic slowdown in late 2024. The IMF praised the UK government's fiscal strategy, deeming it to strike "a good balance between supporting growth and safeguarding fiscal sustainability." Chancellor Rachel Reeves welcomed the upgrade, noting the UK was the fastest-growing G7 economy in Q1. However, the IMF's report also includes caveats. It warns that weak productivity continues to weigh on medium-term growth prospects, and highlights the potential negative impact of global trade tensions, particularly US tariffs, which could reduce the UK economy by 0.3% by 2026. The IMF also suggested the Bank of England should continue easing monetary policy gradually, while acknowledging the complexity of calibrating policy amid recent inflation pickups.

Government exits NatWest

The UK government has formally completed the sale of its last remaining shares in NatWest Group, marking a significant milestone almost 17 years after the bank's £45.5bn taxpayer-funded bailout during the 2008 financial crisis. This final divestment brings to an end a substantial chapter of state intervention in the banking sector. At its peak, the government held an 84.4% stake in NatWest (then Royal Bank of Scotland). The gradual sell-off, which accelerated in recent years, concludes with approximately £35bn returned to the government through share sales, dividends and fees. While this represents a confirmed £10.5bn loss compared to the initial bailout sum, both the government and NatWest's leadership emphasise that the intervention was a "rescue, not an investment," crucial for protecting millions of savers and businesses and preventing a wider economic collapse. Chancellor Rachel Reeves underscored that NatWest's return to full private ownership "turns the page on a significant chapter in this country's history." NatWest’s bailout attracted public anger and scrutiny of the excessive risk-taking that took place in the finance industry. A raft of new regulations were implemented following the crisis, including new rules that forced banks to ring-fence their core retail banking arms from their investment arms, as well as a cap on bonuses.

Fried chicken expansion

Fast food giant KFC announced a £1.5bn investment in the UK & Ireland in the next five years. This strategic move aims to significantly grow its footprint and modernise existing sites, cementing its market leadership amidst increasing competition. The plan involves opening 500 new outlets by 2034, with £466m earmarked for acquiring new urban and drive-thru locations, reflecting evolving post-pandemic consumer demand for convenience. Additionally, over 200 existing restaurants, representing 20% of its estate, will receive upgrades including enhanced digital capabilities and kitchen equipment. This investment is projected to create more than 7,000 jobs across restaurants and the supply chain, delivering an estimated £169m boost to the UK economy. This expansion, coinciding with KFC's 60th anniversary in the UK, underscores their confidence in the long-term potential of the British and Irish quick-service restaurant markets. KFC estimates that the UK fried chicken market is worth £3.1bn annually, and it expects it to continue to grow, with new entrants in recent years including Popeyes, Wingstop, Dave’s Hot Chicken and Slim Chickens.

Elsewhere...

Beauty buyout: Hailey Bieber’s beauty brand Rhode sold to budget makeup powerhouse e.l.f. Beauty for $1bn.

Water payback: Thames Water has been fined £122.7m for breaching rules over sewage spills and shareholder payouts.

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