UK economy shrinks in April as US tariffs kick in

Iraqi News

12-06-2025

London – Britain's economy shrank more than expected in April following a tax hike on UK businesses and a record drop in exports to the United States due to President Donald Trump's tariffs, official data showed Thursday.
Gross domestic product contracted 0.3 percent in the month, compared to 0.2 percent growth in March, the Office for National Statistics (ONS) said in a statement.
Analysts' consensus had been for a GDP contraction of 0.1 percent in April.
Exports of British goods to the United States fell by a record £2 billion ($2.7 billion) the same month, the ONS revealed, following the introduction of Trump's tariffs onslaught.
The data comes one day after Prime Minister Keir Starmer's Labour government laid out its priorities for the coming years, hoping that changes to day-to-day spending amounts and longer-term investment will spur Britain's sluggish economy.
– 'Clearly disappointing' –
Finance minister Rachel Reeves injected the ailing National Health Service with billions of pounds and pumped funds into defence and housing, while making cuts to other departments.
Reeves said Thursday's figures were 'clearly disappointing' but insisted that her spending plans would deliver growth for Britain.
Paul Dales, chief UK economist at research group Capital Economics, noted that the economy faced 'subdued overseas demand and domestic businesses cutting back on spending to compensate for the rise in costs driven by April's increase in taxes'.
Following Labour's return to power last July, following years of Conservative rule, Reeves announced a tax rise for UK businesses which entered force in April.
Official data this week showed that the hike had contributed to a small rise in Britain's unemployment rate and slowdown to growth in average wages.
– Record drop –
Britain's economy had expanded by 0.7 percent in the first three months of the year.
'With the economy now weakening, we can expect to see concerns around further tax rises increase as we near the Autumn Budget — which is likely to weigh on growth even more,' said Lindsay James, investment strategist at Quilter.
The latest data follows also the introduction of a baseline 10-percent tariff imposed on the UK and other countries by Trump at the start of April.
The UK and US have since struck a trade agreement that cuts tariffs on British cars and scraps them on steel and aluminium.
Britain in return has agreed to open up its markets to US beef and other American farm goods.
But the UK remains subject to a 10-percent tariff on most goods exported to the United States.
Decreases in exports to the United States in April were seen 'across most types of goods, following the recent introduction of tariffs', said ONS director of economic statistics, Liz McKeown.
Machinery and transport equipment, including cars, took a notable hit, after four months of consecutive increases for exports of British goods to the US.
Official data earlier this year showed trade in goods between the UK and US remained balanced in 2024.
Britain imported £57.1 billion ($77 billion) worth of American goods last year and exported products worth a total of £59.3 billion.