EY Item Club downgrades UK economic forecast on US trade policies

The UK is likely to see slower economic growth in 2025–2026, with GDP for this year and next revised to 0.8% and 0.9%, down from previous estimates of 1% and 1.6%. Protectionist measures taken by the US will be the key reason for these changes, the EY Item Club reported.

The policies enacted by Donald Trump have already led to falling exports and slowing consumer activity in the UK. This could ultimately hamper the country’s investment levels, specialists said. Therefore, consumer spending is about to grow by 0.9%, compared to the previously anticipated 1.6%. Business investment is also expected to lag, with growth now projected at just 0.3%, well below the earlier forecast of 2%.

EY analysts warn that ongoing global uncertainty and a slowdown in inflation will continue to be a drag on the UK economy. This situation raises questions about the feasibility of the fiscal plans put forth by Chancellor of the Exchequer Rachel Reeves. Her initiatives were based on more optimistic GDP growth forecasts.