Growth forecast slashed as Trump's tariffs hit UK hard

The UK’s economic growth forecast has been slashed by the International Monetary Fund IMF), with a warning that the fallout from Donald Trump’s trade war will hit Britain harder than the rest of Europe.

- ARCHIE MITCHELL ALICJA HAGOPIAN

The global economic organisation predicts growth will stall by 0.5 per cent in 2025, compared to its previous forecast, with a further downgrade of 0.1 per cent in 2026. It means the UK economy will grow by just 1.1 per cent next year, and 1.4 per cent the year after.

Rising government borrowing costs as a result of Trump’s tariffs as well as higher inflation and sky-high energy costs in the wake of Russia’s invasion of Ukraine are all to blame, the IMF said.

The downgrade threatens to wipe out the fiscal headroom chancellor Rachel Reeves clawed back with sweeping benefits cuts in her spring statement, meaning she will likely have to make further cuts or hike taxes when she delivers her second Budget this autumn.

The brutal downgrade, more severe than the 0.2 per cent faced by Europe, comes as Ms Reeves left for Washington last night for the IMF’s spring meetings, which will see finance ministers and business chiefs from across the G7 and G20 group of nations discuss the global economy.

The chancellor will also hold her first meeting with her American counterpart Scott Bessent as Britain seeks to avoid Mr Trump’s damaging levies on imports to the US.

Reacting to the forecast ahead of the meeting, a defiant Ms Reeves said Britain will still be the fastest-growing European economy in the G7.