"Ongoing trade volatility is set to significantly hamper business sentiment and constrain investment plans over the coming year.
“The weaker growth outlook for the UK economy will add pressure to the government’s already limited fiscal headroom. This raises the likelihood of tax rises or further spending cuts in the autumn to meet the government’s fiscal targets. However, we expect the blow to be cushioned by a more dovish Bank of England. With economic growth set to slow, the bank is likely to step up the pace of interest rate cuts to support the domestic economy. We expect this to lower debt interest costs for the government over the coming years.
“The UK economy returned to growth in February, driven by robust services performance and a rebound in manufacturing output. Higher rates of tariffs on car exports to the US is likely to hit manufacturing production in the coming months, although lower energy costs may go a little way to mitigate the impact.
“We expect the UK economy to have grown in the first quarter, however momentum is unlikely to be sustained as the impact of global trade disruptions start to filter through over the coming months. While we expect quarterly growth to remain positive in the UK this year, it is set to be lower, bringing growth in 2025 down to 0.8%.”
