City slashes UK growth forecasts radically in wake of Trump tariffs
City forecasters have radically cut UK growth forecasts as President Donald Trump’s tariffs are widely expected to cause great damage to the global economy.
Markets across Europe are sliding again today after tariffs came into effect, a clear sign that economists and investors are fearing hits to profit.
New research by the polling firm Consensus Economics and the Financial Times has now put their despondency into perspective as an average of ten forecasters shows that the UK is expected to grow at the sluggish pace of 0.8 per cent this year.
The low figure is two thirds of what had previously been expected.
The Bank of England said it expected the UK economy to grow 0.75 per cent this year while the Office for Budget Responsibility (OBR), the fiscal watchdog, said growth would come in at one per cent.
Both central forecasts were made before Trump’s Rose Garden speech where he unveiled a list of tariffs to be imposed on major economies as well as uninhabited islands.
The US president’s tariffs of ten per cent on all goods imports has ruffled analysts, who are largely unsure on what the effects will be on inflation in the UK.
Markets believe interest rates could fall below four per cent by the end of the year but economists at Capital Economics said the Bank of England could hold its ground .
“The uncertain influence on CPI inflation from the tariffs may mean the Bank can’t conclude that the upside risks to inflation have faded,” they said.
“Moreover, the extra uncertainty caused by tariffs more generally may mean the Bank is more inclined to wait and see how things develop.”
Research by the British Chambers of Commerce (BCC) separately showed how firms are struggling with higher costs brought about by national insurance tax hikes made by Chancellor Rachel Reeves.
Its survey of over 5,000 businesses revealed that only a fifth of firms increased their workforce in the first three months of the year while around the same number of companies reported a decline.
Pressures on employment and extra constraints brought by tariffs are likely to worry Reeves, who has repeatedly said the government is determined to deliver growth “further and faster”.