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The UK economic system suffered its worst contraction in nearly two years in April as Donald Trump’s commerce conflict hit exports to the US and tax will increase held again the providers sector, underlining the problem going through chancellor Rachel Reeves in boosting development.
The 0.3 per cent GDP decline was the steepest since October 2023 and under the 0.1 per cent contraction forecast by economists polled by Reuters. It adopted development of 0.2 per cent in March.
Output within the dominant providers sector fell 0.4 per cent, with the top of a tax break on house purchases hurting property brokers and regulation companies. Items exports to the US fell probably the most on file, suggesting exercise had been introduced ahead forward of the sweeping tariffs that took impact in April.
UK corporations have additionally confronted a rise in nationwide insurance coverage contributions since April, whereas households are grappling with increased utility payments.
The UK economic system grew by 0.7 per cent within the first three months of this yr, however the Financial institution of England expects the tempo of development to sluggish to 0.1 per cent within the second quarter.
Rob Morgan, chief Funding analyst at funding agency Charles Stanley, stated first-quarter development had been helped by “a touch for exports” forward of the imposition of tariffs.
However he added: “With that spike in exercise within the rear-view mirror it’s again to a extra mundane actuality. UK development properly under the place the federal government desires it to be.”
On Wednesday Reeves delivered the federal government’s spending evaluate, which promised a lift for the NHS however real-term spending cuts for a lot of Whitehall departments.
Responding to the GDP figures on Thursday, Reeves stated that “whereas these numbers are clearly disappointing, I’m decided to ship on that mission”.
Following the discharge of the info, the pound dipped however remained up 0.2 per cent on the day at $1.357 towards a broadly weaker greenback.
The BoE’s Financial Coverage Committee has reduce rates of interest 4 occasions since August 2024, however was break up 3 ways over final month’s quarter-point discount to 4.25 per cent.
This week merchants elevated their bets that the BoE will ship two extra quarter-point cuts this yr, with the subsequent transfer coming in September, after official information confirmed the unemployment fee rose to a four-year excessive within the three months to April.
