The UK economy is facing a sharp slowdown over the next two years, as global trade tensions—driven by U.S. President Donald Trump’s new tariffs—weigh heavily on consumer confidence and business investment.
A leading economic forecasting group has downgraded its projections for the UK. GDP growth is now expected to reach just 0.8% in 2025, down from a previous estimate of 1%. For 2026, the forecast has been cut from 1.6% to 0.9%.
The group cites rising uncertainty, weakened domestic sentiment, and the ripple effects of global protectionist policies.
Public confidence is also at record lows. A long-running survey shows that 75% of Britons believe the economy will worsen over the next year. Only 7% expect improvement, while 13% foresee no change. The net confidence score now stands at -68—the worst in the poll’s history, dating back to the late 1970s.
New U.S. tariffs are a key concern. Washington has imposed a 10% levy on most imports and up to 25% on cars, steel, and aluminium. The United States is the UK’s second-largest trading partner, accounting for around 16% of British goods exports. Analysts say the tariffs will not only hit exports but also prompt consumers to cut spending and businesses to delay investments.
High-cost purchases are expected to decline, and companies are scaling back capital expenditure plans.
Despite the gloom, many UK businesses are exploring new markets. A growing number of mid-sized firms are shifting their focus to Asia, Africa, and Australia. Nearly 40% of firms surveyed plan to increase exports this year. Interest in Europe is also rising, with 41% of mid-sized companies planning to expand their presence in EU countries.
These firms generated £130 billion in overseas sales last year and are seen as key players in the UK’s economic recovery.
In a sign of global supply chain shifts, a major U.S. tech firm has announced plans to move all iPhone production for the American market to India—part of a broader trend to reduce reliance on Chinese manufacturing.
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