• Mou Mou
• 15 May, 2025

·      Impact of US Tariffs on UK Businesses in 2025

·      UK economy grows 0.7% in Q1 2025, outpacing G7.! But can it last.? #UKEconomy2025 #JobsTax debate

·      What’s driving UK economy growth in 2025.?

a)    Services sector

b)    Business investment

c)    Pre-tariff exports #UKEconomy2025

The UK economy kicked off 2025 with a bang, growing 0.7% in the first three months, beating forecasts and outpacing major economies like the US and Germany. Fuelled by a booming services sector and robust production, the figures signal optimism. But with US tariffs and rising employer taxes kicking in, can this momentum last.? Dive into the details as experts and businesses weigh in on what’s next for Britain’s economy.

Details & Context
The UK economy grew by 0.7% from January to March 2025, surpassing analysts’ expectations of 0.6%, according to the Office for National Statistics (@ONS) on May 15, 2025. The services sector including retail and hospitality, led the charge while production, particularly manufacturing also saw significant gains. March alone recorded 0.2% growth, defying predictions of stagnation.

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This growth spurt came just before major economic shifts in April including US import tariffs and increased UK employer National Insurance contributions. The ONS noted that February’s strong performance was partly due to businesses ramping up exports to dodge impending US tariffs. Business investment also soared, rising nearly 6% in the quarter, signalling confidence despite uncertainties.

Chancellor Rachel Reeves hailed the figures, emphasizing the UK’s edge over G7 peers like the US, Canada, France, Italy and Germany. However, critics warn of headwinds. The Office for Budget Responsibility and International Monetary Fund have downgraded UK growth forecasts for 2025, citing tax hikes and global trade tensions. The employer tax increase, dubbed a “jobs tax” by opponents has sparked debate about its impact on hiring and expansion.

Businesses are feeling the pinch. Annabel Thomas, CEO of Nc’nean Whisky Distillery in Scotland, plans to absorb US tariffs to keep prices stable, banking on falling UK interest rates to boost consumer spending. Meanwhile, John Inglis, founder of Exacta form, a diamond tool manufacturer, is hesitant to make big moves. With a US factory and 100 UK employees, he fears tariffs and tax hikes could erode profits, saying, “We’re holding fire on decisions.”

Quotes

·      “The UK economy’s strength and potential are clear, outpacing major global players.” – Rachel Reeves, Chancellor, May 15th, 2025.

·      “Labour’s tax hikes risk derailing the fastest-growing G7 economy.” – Mel Stride, Shadow Chancellor, via X, May 15th, 2025.

·      “This growth is cheering but April’s tax rises could hit hard.” – Liz Martins, HSBC Senior UK Economist, @BBC Today, May 15th, 2025.

Additional Information
X posts reflect mixed sentiments with #UKEconomy2025 trending as users debate growth versus tax concerns. Posts praising the 0.7% rise often cite Reeves’ comments, while critics, using #JobsTax, echo Stride’s warnings. Web sources like @BBC News and @TheGuardian confirm the ONS data, noting the services sector’s dominance and tariff-related export surges.

A 2024 Bank of England report projected interest rate cuts in 2025, supporting Thomas’ optimism about consumer spending. However, a Capital Economics analysis warns that April’s tax hikes and global trade barriers could stall growth with early April data showing weaker performance. The Resolution Foundation also flagged “tariff-shaped clouds” looming over the global economy, impacting UK exports.

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Impact Analysis

·      Positive Impact: The 0.7% growth boosts confidence, signalling a robust recovery post-2024. Rising business investment and service sector strength could drive job creation and consumer spending, especially if interest rates fall.

·      Challenges: US tariffs and employer tax hikes threaten small businesses and exporters. Firms like Exacta form may delay expansion, risking job losses. Weaker April data suggests a potential slowdown.

·      Economic Outlook: While the UK outperformed G7 peers, downgraded forecasts and global trade tensions could curb momentum. Businesses absorbing tariffs may face slimmer margins, affecting long-term growth.

Conclusion
The UK economy’s 0.7% surge in early 2025 is a bright spot, driven by services, production and pre-tariff export rushes. Yet, with US tariffs and tax hikes looming, the road ahead is bumpy. Businesses like Nc’nean are optimistic while others like Exacta form, tread cautiously. As Britain navigates these challenges, balancing growth with stability is key. Will the UK keep its G7 lead or will new hurdles dim this shine.? Stay tuned as the economy’s next chapter unfolds.

Call to Action (CTA)
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