Cliff Notes
- The UK Economy shrank by 0.3% in April, exceeding economists’ expectations of a 0.1% contraction, largely due to President Trump‘s tariff policies.
- The services and production sectors saw declines of 0.4% and 0.6%, respectively, with a significant drop in goods exported to the United States.
- Increased costs for businesses, driven by higher minimum wages and national insurance contributions, contributed to the negative economic performance.
UK economy contracted sharply in April after Trump’s tariffs with record export fall
The UK economy shrank more than expected in April as the worst of President Trump’s tariffs hit, according to the latest official figures.
The standard measure of economic output (GDP) contracted a sharp 0.3% in April, data from the Office for National Statistics (ONS) showed.
During the month, Mr Trump’s so-called “Liberation Day” applied steep tariffs to countries around the world and sparked a trade war with China, the world’s second-largest economy.
Bad news for Reeves
It’s bad news for Chancellor Rachel Reeves, who has made the push for economic growth her number one priority.
Additional costs on businesses were also levied during the month, as higher minimum wages and employer national insurance contributions took effect, which businesses told the ONS played a part in their performance.
When looked at over a three-month period, however, the economy grew. The expectation of trade upset looks to have pushed business activity forward to the first few months of the year.
Why?
The biggest part of the economy, the services sector, contracted by 0.4%, and production dropped 0.6%.
There was the largest ever monthly fall in goods exported to the United States, the ONS said.
Decreases were seen across most types of goods due to tariffs, it added.
Higher stamp duty depressed house buying and meant legal and real estate firms fared badly in the month.
After a strong showing in the first three months car manufacturing performed poorly.
