29th April 2025 | By Megi Dervishi

UK Growth Outlook Dims as Global Trade Tensions Rise: What Businesses Need to Know

The UK economy is facing mounting pressure from external shocks, with growth expected to slow significantly this year. According to the EY Item Club, UK GDP is now forecast to rise by just 0.8% in 2025, down from 1%. Forecasts for 2026 have also been halved, as ongoing global trade disruption dampens business investment and consumer confidence.

One of the biggest contributors to the gloomy outlook is the re-escalation of US trade tensions under Donald Trump’s renewed tariff policies.

Tariff Turbulence in the US

The US has imposed sweeping tariffs, including a 10% blanket import tax on most countries and 25% on UK steel, aluminium, and vehicles. For UK exporters, this poses a direct risk, with the US currently accounting for 16% of total UK goods exports. Sectors such as manufacturing, automotive, and heavy industry are expected to feel the strain first.

However, it’s the indirect effects that could hit harder. Higher costs for US consumers and businesses are leading to slower demand, weaker investment, and growing signs of a US slowdown — all of which will ripple through to UK firms trading across borders.

Shipping Data Signals Global Slowdown

Recent shipping data underscores the extent of the disruption. Arrivals at the Port of Los Angeles, the busiest in the western hemisphere, are down by almost a third compared to the same period last year. Bookings for containers from China to the US have plummeted 45% year-on-year, according to Vizion data. This points to a broader collapse in trade volumes that economists warn could trigger a US recession by summer.

Inventory surges, falling new orders, and reduced capital spending are already being reported by US companies. Large retailers like Walmart and Target have raised concerns about supply chain disruption, rising prices, and the risk of empty shelves later this year.

Economists, including Paul Krugman and analysts at Apollo Global Management, warn that these trends resemble the early stages of the 2020 downturn — but this time, the disruption is being driven by political decisions, not a global health crisis.

What This Means for UK Businesses

For UK businesses involved in international trade, this creates both risk and urgency. Exporters could face falling demand from the US, especially in tariff-affected sectors. Importers may experience price volatility, longer lead times, and supply chain uncertainty.

However, many UK firms are already adapting. A BDO survey found:

• 40% of mid-sized businesses expect to increase exports in the coming year
• Over half of the firms in tech, retail, and wholesale are planning international expansion
• Key target markets include the EU (41%), Australia (38%), Africa (36%), and Asia (30%)

This shift reflects a broader move to reduce reliance on the US and China and to diversify into more stable or high-growth regions.

Strategic Priorities for 2025

Given the outlook, businesses should consider the following steps:

• Diversify export markets to spread risk and uncover new growth opportunities
• Reassess supply chains to ensure resilience under new tariff structures
• Plan for volatility in shipping times, costs, and regulatory frameworks
• Stay agile as political and economic developments continue to evolve

While the macroeconomic picture is complex, UK businesses have shown they are prepared to act decisively. Last year, UK mid-sized firms generated £130bn in overseas trade revenue. Their response in the coming months will be crucial to sustaining momentum.

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