The United Kingdom’s economic outlook has weakened significantly, with growth forecasts for the next two years downgraded amid escalating global trade tensions. According to a forecast by EY Item Club, Britain’s GDP is now expected to expand by just 0.8% this year, while consumer and business confidence have dropped to historically low levels.
A separate survey by Ipsos Mori reveals that public sentiment towards the economy is at its most negative since records began in 1978. With three-quarters of Britons predicting a further decline, concerns over international trade disruptions and weakened domestic investment are becoming increasingly prominent.
Tariffs and Trade Uncertainty Threaten UK Growth
The slowdown is attributed primarily to the indirect effects of global tariffs initiated by former US President Donald Trump, which have reverberated across international markets. About 16% of UK goods exports are directed to the United States, where new tariffs of 10% on general imports and up to 25% on cars, steel, and aluminium have dampened demand.
According to EY Item Club, this external pressure is expected to suppress British export activity directly.
However, the broader economic impact is anticipated to stem from diminished domestic confidence. British consumers, already cautious, are likely to cut back on large purchases, while businesses may scale down investment plans in response to the uncertain trading environment.
Andrew Bailey, Governor of the Bank of England, described the situation as a “growth shock” for the UK, highlighting the compounding risks to the domestic economy.
In parallel, the International Monetary Fund has reduced its UK growth forecast for 2025 to 1.1%, down from 1.6% predicted earlier in the year. The combination of weaker international demand and local hesitation suggests that the UK’s economic recovery could be slower and more fragile than previously anticipated.
Businesses Shift Focus to New Markets
Despite the challenges, many British firms are proactively seeking opportunities beyond traditional markets. A survey by advisory firm BDO found that expanding or increasing exports overseas is now a strategic priority for nearly a third of mid-sized UK businesses.
According to the report, 40% of firms expect to boost international sales within the next year, with the retail, wholesale, and tech sectors showing the strongest ambitions.
Targeted regions include Africa, Asia, and Australia, with more than one-third of businesses aiming for growth in African markets alone. Meanwhile, 41% of mid-sized enterprises are planning to reinforce their presence in EU countries, demonstrating a recalibration of strategies towards diversified global markets.
Richard Austin, a partner at BDO, commented that despite a challenging environment, “the UK’s mid-sized businesses remain highly ambitious,” noting that these companies generated £130 billion in overseas revenue last year.
This resilience suggests that while short-term economic prospects appear subdued, the private sector’s international drive could provide a partial buffer against broader global headwinds.
