The UK growth forecast has been sharply downgraded as rising US tariffs fuel global trade uncertainty. According to the EY Item Club, Britain’s economy is now expected to grow just 0.8% in 2024 and 0.9% in 2026, far below earlier predictions. The new US tariffs are set to hit key export sectors, weakening business confidence, consumer spending, and overall investment.
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EY Item Club Slashes UK Growth Predictions for 2024 and 2026
The UK’s economic growth outlook has been revised downward due to trade disruptions caused by new US tariffs, according to the EY Item Club. The forecaster now expects the economy to grow by just 0.8% this year, down from its earlier 1.0% estimate, and projects 0.9% growth in 2026, a steep drop from 1.6%.
US Tariffs Hit Business and Consumer Confidence
New US-imposed tariffs, including a 10% baseline tax on imports and 25% on aluminium, steel, and cars, are expected to dent both business confidence and consumer spending. This tariff regime, covering key UK export sectors, will likely lead to falling demand for goods and services internationally.
Anna Anthony, regional managing partner at EY UK & Ireland, emphasized that uncertainty in global trade is forcing businesses to adopt a cautious approach, which in turn dampens investment levels.
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Global Trends and Further Risks to UK Growth
The International Monetary Fund (IMF) has also downgraded its UK growth outlook, now predicting 1.1% growth for this year, compared to the previous forecast of 1.6%.
EY warned that even if US tariffs do not escalate, ongoing trade tensions could slow global economic growth, indirectly harming the UK’s prospects. Exports are forecasted to decline by 0.5% in 2025 and 0.4% in 2026.
Matt Swannell, EY’s chief economic adviser, noted that economic activity is likely to slow from the second quarter of 2024 into early 2025.
Glimmers of Hope: Services Sector and Interest Rate Cuts
Despite the gloomy forecast, the services sector is expected to grow modestly this year. Furthermore, anticipated interest rate cuts by the Bank of England — to 3.75% by year-end and 3.5% by early 2026 — could support household and business spending.
Inflation is predicted to remain above 3% through most of 2024 before easing to 2.4% by 2026.
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