UK economy expands 0.5% ahead of tariff impact and trade wars
The UK economy grew by 0.5% in February, according to ONS, surpassing expectations ahead of the incoming impact of tariffs and trade wars.
City of London economists had predicted a rise of just 0.1%, but ONS has reported a surprise rise driven by a boost in manufacturing and production, helping to overturn a modest dip in January.
It comes as the UK economy braces itself for the impact of tariffs on goods being imported to the US, businesses battling with £25 billion in tax rises and consumers faxing significant council tax and utility bill rises.
The UK is subject to a 10% tariff on almost all goods bought into the US, with expectations of a hit to British exporters and economic growth, hampering the UK government’s economic priorities in the wake of the Spring Statement last month.
Mark McCarthy, chief revenue officer at Basware, commented: “Trade wars and tariff uncertainty introduce volatility into the global economy. For major enterprises, especially those with complex supply chains or international footprints, this creates hesitation around IT spending. CIOs and CFOs may want to delay large IT investments, reassess strategic priorities and scrutinize every dollar of spend.
Organizations are working on contingencies, but in a turbulent environment, smart enterprises don’t stop investing, they get more focused on their spending and look for greater ROI on every purchase. This means looking to drive even more cost efficiency, investing in areas to mitigate operational risk, accelerating automation to do more with less, and increasing agility and visibility over the tech stack.
Supply chains are not nimble as we saw during the pandemic, so CIOs and CFOs will also be considering suppliers that have the skills to handle the complex tax and tariff landscape. Combining technology solutions with tax compliance and skills will be vital in the near future as these tariffs come into effect.”
Meanwhile, Sarah Breeden, deputy governor for financial stability at the Bank of England, has said it is ‘too early to call’ the impact that tariffs will have on inflation.
Despite this, Breeden warned of an adverse effect on business activity, with potential further turmoil in financial markets.
The Bank of England is said to be monitoring the situation to judge the impact on the UK economy, looking for panic selling that could undermine confidence as ‘underlying vulnerabilities’ remain within the economy.