UK economy shrinks in April as tax rises and Trump tariffs kick in – Chamber

The UK economy contracted by more than expected during April as tax rises kicked in and exports to the US plunged following President Trump’s tariff announcements.

The economy shrank by 0.3 per cent, more than the 0.1 per cent fall predicted by experts - marking the steepest monthly decline since October 2023

In April, employers' National Insurance and water, energy and council tax bills all rose, while the introduction of tariffs by President Trump led to the largest monthly fall on record in exports to the US.

The Office for National Statistics (ONS) said a poor month for the services sector, which includes businesses ranging from retail and hospitality to hairdressers and finance, was behind the contraction.

Car manufacturing performed poorly too after the introduction of 25 per cent tariffs on vehicles being imported to the US.

US president Donald Trump has imposed tariffs on many countries in an attempt to encourage businesses and consumers to buy more American-made goods.

Despite the deal agreed with the US, a 10 per cent import tax still applies to most UK goods entering America.

Tariff reductions agreed on UK car and steel exports have also not yet come into force.

Ruth Fleet (pictured), senior policy advisor at Greater Birmingham Chambers of Commerce, said: “Although April’s GDP data shows greater economic instability than the previous three months, it is unlikely to cause too much concern at this point for the Government.

"It was expected that turbulence in the US through the introduction of far-reaching tariffs in April would have a knock-on effect on growth and this has been reflected in the data with services and production output falling.  

"Despite this, construction sector output grew by 0.9 per cent and the announcement of multiple large infrastructure projects across the UK in the Government's Spending Review yesterday will likely boost confidence and growth in construction further in coming months.

"We will see in due course whether April's GDP data is truly just a blip, but with concerns about tax rises in Autumn should the fiscal situation worsen, we implore the Government to set out a clear plan for supporting businesses through the upcoming changes from the Employment Rights Bill, as well as offering relief by reviewing business rates and employer’s NI contributions to bolster business confidence and unlock investment."

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