Investor optimism rises for UK economy despite tariffs

Investors are feeling more positive about the UK economy as trade disputes grow between the US and EU. However, some experts warn that the UK is still affected by President Donald Trump’s tariffs. The Bank of England maintained interest rates last Thursday, highlighting concerns about geopolitical uncertainty. Despite this, economic growth is expected to improve in 2025, with predictions of a 1.4% increase. Inflation is anticipated to decrease, and the labor market remains strong, supported by government efforts to boost growth and reduce the national deficit. Sanjay Raja from Deutsche Bank noted a newfound optimism about the UK during a recent trip to the US. He mentioned factors like deregulation and potential trade agreements with the EU as positive signs. US President Trump seems willing to exclude the UK from harsh tariffs, particularly after UK Prime Minister Keir Starmer’s visit to the White House. While the UK may benefit from avoiding the worst of Trump’s tariff threats, concerns linger. The UK will still feel the impact of new US tariffs on steel and aluminum exports, which were worth around £595 million last year. A slowdown in global trade could also hurt demand from key partners, particularly the EU. Experts caution that the UK remains at risk of coming under US trade scrutiny. Some analysts worry about ongoing tariffs and their effects on the UK economy. They emphasize that, while the UK government is making strides to strengthen the economy, growth remains low in the short term, impacted by rising costs and workforce issues.