A month ago, all the economic buzz was about the Chancellor’s Spring Statement and the real-world implications as the significant cost hikes from the Autumn Budget finally landed with a shuddering thud onto the business models of UK companies.

That seems a lifetime away already, as attention has moved on from more parochial considerations to the global trade turmoil unleashed on 2 April in the White House Rose Garden as eye-watering levels of tariffs were imposed on a largely random basis (at least in economic terms) on almost every country around the world. We looked in detail at the likely impact on UK businesses immediately after the announcements.

Since then, there has been a bewildering display of economic ‘hokey pokey’ (as the hokey cokey is known in America) with a part of the original tariffs currently having been suspended for 90 days while multiple frantic bilateral negotiations take place with individual countries, each trying to beat The President at dealmaking.

Current USA tariffs on UK

As things stand, all UK goods exports to the USA are bearing a 10% tariff, apart from aluminium, steel and automotive products which carry a heavier burden of 25%. It is impossible at this stage to know what these figures might be even in a week’s time, never mind a month or a year, or indeed what the cost might be of concessions given away to strike any bargain.

The UK exports goods to the value of £60bn a year to the USA, indicating the scale of this problem. The possible negative impact unless the tariff burden can be reduced has now been spelt out by the IMF, which has just cut its forecast for UK GDP growth for 2025 from 1.6% to 1.1% and for 2026 from 1.5% to 1.4%.  It is little consolation that the IMF is suggesting that the major economy worst affected will actually be America.

What are the latest economic indicators for the UK?

GDP

• February 2025:
  • Growth came in as a pleasant surprise at 0.5%, compared to market expectations of only 0.1%. The previous month’s figure was revised up from a fall of 0.1% to a no growth position.
• All sectors of the economy grew:
  • Services GDP by 0.3%.
  • Production by 1.5%
  • Construction by 0.4%.
  • Consumer-facing services grew by 0.7%, its fourth consecutive monthly rise.
  • All these outcomes were better than in January.
• The less volatile three-month GDP movement to February 2025 was up 0.6%.

Inflation

• CPI inflation in March 2025 continued the downward trend at 2.6% compared to 2.8% in February and 3.0% in January. This was marginally better than the consensus prediction of 2.7%.
• The major factors were reductions in recreation and culture prices, as well as motor fuel.
• ‘Core’ inflation (excluding the more volatile elements, such as housing and energy costs) also fell, dropping from 3.5% to 3.4%.
• Service sector inflation is falling too: From 5.0% in February to 4.7% in March.
• It is generally accepted that March and February’s falls will be reversed from April onwards, as the impact of the price rises driven by Budget cost hikes, the rise in the energy price cap, soaring council tax and water bills push the calculations upwards once more.
• Having gone back to 3% or higher in April 2025, inflation is expected to peak in the autumn between the 3.5% some economists have suggested and 3.7% expected by the Bank of England. The latest OBR prediction is for an average 3.2% in 2025 before the rate eventually falls back to the target level of 2% in 2027, but this was before the global trade war erupted.

Employment

Labour force data published by the Office for National Statistics is acknowledged by ONS to be unreliable and would be ignored if it wasn’t so crucial to government fiscal policy. Nevertheless, ONS figures show:

• Unemployment has settled for now at 4.4% in the quarter to March 2025. This is 0.5% higher than pre-pandemic.
• Economic inactivity is heading the other way, falling slightly from 21.5% to 21.4%.
• Vacancies fell by 26k and are at long last finally back below pre-pandemic levels.
• Pay growth is still worryingly elevated at 5.9%. This remains an ongoing threat to inflation control.

Insolvencies

• The latest non-seasonally adjusted company insolvency numbers of 2,225 failures across the whole UK for March 2025 show sharp rises of 11% compared to February 2025 and 9% on January 2025.
• This is a sustained upward trend for the first time in quite a while. The March figure is also 16% higher than a year ago in March 2024.
• There were major increases in both creditor-enforced compulsory windings up and Creditor’s Voluntary Liquidations initiated by company directors who could see no way forward.

Government borrowing

• The gap between government income and spending was £152bn in the year to March 2025 according to ONS figures, a startlingly sudden and adverse variance from the £137bn forecast as recently as March by the Office for Budget Responsibility.
• This raises the spectre of the Chancellor being forced into further tax rises and still deeper spending cuts in her next Autumn Budget.
• That outcome would be bad news for corporate profits and the uncertainty around is bound to be an inhibitor of business investment.

Interest rates

• Usually, falling inflation and rising growth would be the prompt for the Bank of England to cut UK interest rates, but these are far from normal times.
• Despite the outbreak of America’s trade war with the world, the consensus among economists is still that there will be much-needed reductions, probably starting this month.
• What nobody is sure of now is how many downward steps there will be and where rates might settle. This is yet another unwelcome reason for businesses to hold off on their investment plans.

What next for UK businesses?

The Trump tariff turmoil has introduced levels of economic uncertainty not seen since the onset of the pandemic. The timing immediately after the arrival of cost increases from the Autumn Budget could hardly be worse.  Business confidence has fallen sharply to levels not seen since late 2022 according to the latest research by the Institute of Chartered Accountants. Consumer confidence is also very weak.

The likely but undesirable outcome, at least in the short term, will probably be ‘hoarding’ behaviour. Consumers will save instead of spending, or at least they will spend less. Business leaders will put investment plans on hold, or else cancel projects altogether.

Like all crises, this situation will generate opportunities as well as posing threats. Pursuing the first will be for the brave and for financially robust businesses. Dealing with the latter means being stoically realistic, and definitely not exuberantly optimistic. Above all else, the business community needs to be acutely risk aware. The default setting should be ‘if in doubt, don’t’.

If you are seeking professional advice for your business, Opus is here to help. You can speak to one of our Partners, who can discuss options with you. We have offices nationwide and by contacting us on 0203 995 6380, you will be able to get immediate assistance from our Partner-led team.