The UK economy continues its slow and uneven recovery, with fiscal challenges, uncertainty over geopolitical events and shifting global trade policy continuing to cloud the outlook. 

UK-US trade deal in place – but uncertainties persist

Following the seismic shift in US trade policy in April, the UK government succeeded in securing a trade agreement with the US, resulting in tariff reductions for several key exports. This development contributed to notable improvements in May’s PMI figures and prompted an upward revision of the UK Consensus GDP forecast for 2025 in May and June to 1.0%, from 0.7% in April.

However, it is important to recognise that many UK exports to the US will remain subject to increased tariffs, and global trade policy risks persist, with the potential for supply chain disruptions or negative repercussions for the UK from higher tariffs imposed on major trading partners.

Latest business surveys indicate that businesses and consumers continue to face numerous challenges. For services firms, the June PMIs signalled the largest operating margin squeeze in more than two years, following increases in national insurance contributions and minimum wage levels. Simultaneously, households are experiencing renewed financial pressure, following tax increases including higher stamp duty, and a re-acceleration of food price inflation.

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