The UK economy is predicted to undergo a significant slowdown for the next two years as Donald Trump’s global tariff dispute impacts consumer spending and business investment, according to a forecast by leading prognosticators at EY Item Club. This study, which is backed by the big four accounting firm EY, arrives as a separate survey reveals that confidence in Britain’s economy has plummeted to the lowest recorded levels. The most recent Ipsos Mori poll, a long-standing tracker of economic optimism in Britain since 1978, found that three out of four Britons anticipate the economy declining over the next year. Only 7% foresee improvement, while 13% think it will stay the same, resulting in a net score of -68.
EY’s forecast expects the UK’s GDP to grow by 0.8% this year—their projection shrinking from 1% in February—and its 2026 forecast adjusted downward from 1.6% to 0.9% as long-term effects take hold. The International Monetary Fund (IMF) recently reduced its growth forecast for the UK to 1.1% from the 1.6% it predicted in January, reflecting a “growth shock” attributed to Trump’s trade policies. About 16% of the UK’s goods exports are to the US, a market with a baseline tariff of 10% for most countries and 25% for cars, steel, and aluminum, which will directly undermine demand for British goods.
EY Item Club anticipates that the indirect consequences of these new policies, which are affecting UK consumers already hesitant about investing in larger purchases, will constitute a heavier blow. Businesses, too, are likely to limit their investment over the next two years. Nevertheless, the research indicates that British businesses are responding to threats of supply chain disruptions by targeting new export markets in Asia, Africa, and Australia. Expanding or exporting overseas is a top priority for nearly a third of mid-size UK businesses over the upcoming year, with nearly 40% of companies surveyed expecting to increase their exports, rising to over half within the retail, wholesale, and tech sectors.
Apple, for its part, is reportedly planning to shift the assembly of all its iPhones for the US market to India as a means of lessening its reliance on Chinese manufacturing amid this trade war. Richard Austin, a BDO partner, emphasized the ambitious growth strategies of UK’s mid-sized businesses, who generated £130 billion from international trade last year alone and are thus crucial to the nation’s economy.
Source: https://www.theguardian.com/business/2025/apr/28/uk-growth-forecast-to-slow-sharply-as-trump-tariffs-push-confidence-to-record-low
