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LONDON—The International Monetary Fund on Tuesday raised its estimate for U.K. growth this year, but marked down its forecast for 2017, saying uncertainty about the country's future ties to the European Union are likely to weigh on the British economy for some time to come.

Britons voted in June to leave the EU and the U.K. Prime Minister on Sunday said she plans to notify the EU of Britain's formal exit from the EU by March, a move that will begin divorce talks expected to last at least two years.

The pound on Tuesday fell to a three-decade low against the dollar, losing 0.82% to reach $1.274. The pound was trading lower against the euro at €1.141, down 0.4%.

The IMF on Tuesday said in its regular World Economic Outlook that it expects the U.K. to grow 1.8% in 2016 and 1.1% next year.

The new forecast for 2017 is slightly lower than one the fund had made in July, in the aftermath of Britain's June vote to leave the EU, and sharply lower than it was predicting earlier in the year. The fund in July forecast U.K. growth of 1.7% this year and 1.3% in 2017. Before June's referendum on EU membership, the fund had penciled in growth of 1.9% in 2016 and 2.2% in 2017.

The improvement in the fund's 2016 forecast reflects a run of better-than-expected economic data in the U.K. that suggests the economy has weathered the surprise referendum result well. A survey of managers in the construction sector, published Tuesday by financial information firm IHS Markit Ltd., recorded the first expansion in activity in September for four months. The services and manufacturing sectors posted healthy growth over the summer, according to official data. A preliminary estimate of third-quarter growth will be published later this month.

But, in common with the Bank of England and many economists, the IMF said it expects the economy to slow in 2017 as uncertainty over the U.K.'s EU ties depress consumer spending as well as business investment and hiring. It said the subdued growth it expects next year assumes the coming exit talks proceed smoothly, and it urged the government to respond to any slowdown with growth-friendly tax-and-spending policies if needed.

The changes to the IMF's forecasts echo those of London-based economists, many of whom were expecting a sharp slowdown in the immediate aftermath of the vote.

Of 15 economists at financial institutions polled by The Wall Street Journal, 13, including staff at Barclays, Citigroup, Goldman Sachs and Morgan Stanley, have in recent weeks raised their 2016 economic-growth predictions compared with their forecasts in July and August. The survey showed that economists now expect the U.K. to grow by 1.8% this year, the same rate expected before the referendum.

Those surveyed have also upped their expectations for next year. Those which in the immediate aftermath of the vote predicted that the U.K. economy would shrink next year, including Barclays and Credit Suisse, have now revised their forecasts, penciling in modest expansion or no growth instead.

However, the surveyed economists still see U.K. gross domestic product taking a substantial hit next year. They now predict an expansion of just 0.7% in 2017, compared with pre-referendum expectations of 2.1% growth.

Beyond 2017, the IMF said it anticipates the U.K. will grow more slowly than it would have done had it remained an EU member. The fund said it expects medium-term growth of around 1.9% a year, against a pre-referendum forecast of 2.1%.

The downgrade in the U.K.'s growth potential reflects "impediments to trade, migration and capital flows" that the fund expects will accompany the U.K.'s EU exit. Proponents of quitting the EU say the U.K. will flourish outside the EU, where it will be free to ink new trade deals for goods and services with old allies such as the U.S. and Australia, as well as faster-growing parts of the world in Asia.

In a separate report, the IMF said an U.K. exit from the EU poses challenges for the stability of the U.K. financial system. Banks could face higher operating costs if they lost their automatic right to sell services across the 29-member bloc, the IMF said, while foreign investment into the country could decline, hurting the price of real estate and other assets.

Write to Jason Douglas at jason.douglas@wsj.com and Wiktor Szary at Wiktor.Szary@wsj.com

(END) Dow Jones Newswires

October 04, 2016 09:45 ET (13:45 GMT)

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