UK Economy Shrinks by the Most Since 2023 as US Tariffs Hit

• Britain's economy slowed sharply in April, reflecting shockwaves from U.S. President Donald Trump's announcement of wide-ranging tariffs and a one-off hit from the end of a tax break on property sales, official data showed on Thursday.
• Gross domestic output shrank by a larger-than-expected 0.3% in April from March - the biggest monthly drop since October 2023 and more than the 0.1% fall forecast in a Reuters poll, following 0.2% growth in March.
• Finance minister Rachel Reeves said the GDP numbers were "clearly disappointing". Britain's economy has grown slowly since the COVID-19 pandemic, and the fall in monthly GDP was led by a 0.4% contraction in output from the dominant services sector.
• A big factor in this was a slump in real estate and legal activity in April after the end of a temporary tax break on house purchases, which contributed 0.2 percentage points of the overall 0.3 percentage point fall in output in April. Car makers also reported lower output and exports to both the United States and the European Union.
• Britain's economy had expanded by 0.7% in the first quarter of 2025, outstripping growth in other countries in the Group of Seven advanced economies and prompting the Bank of England to revise up its full-year growth forecast to 1% last month. However, the BoE revised down its growth forecast for 2026 to 1.25% and said it expected the tariffs to knock 0.3% off British output in three years' time.
• BoE policymakers are expected to keep interest rates unchanged next week as they are faced with competing forces of stubborn inflation and a relatively sluggish economy, but most economists polled by Reuters expect two more rate cuts this year.

(Source: Reuters)