UK economy shrinks 0.3% in April amid tariff uncertainty and tax increases

UK economy shrinks 0.3% in April amid tariff uncertainty and tax increases

The UK economy contracted by 0.3% in April, according to data from the Office for National Statistics (ONS), marking the sharpest monthly decline since October 2023. The downturn follows modest growth of 0.2% in March and 0.5% in February and exceeded economists’ forecasts of a 0.1% fall.

The contraction was driven by multiple factors, including higher taxes and global trade uncertainty linked to U.S. President Donald Trump’s new tariffs. The introduction of a 25% levy on UK auto exports contributed to a 0.6% drop in manufacturing, with significant reductions in car and pharmaceutical production. Goods exports to the U.S. fell by £2 billion— the largest monthly decline since records began in 1997.

The services sector also shrank by 0.4%, partly due to a fall in house sales following stamp duty changes in England and Northern Ireland. Construction was the only sector to grow, rising 0.9% on the back of increased housebuilding. Chancellor Rachel Reeves described the data as “disappointing but not unexpected,” citing global uncertainty. While some analysts expect a rebound in May, others caution the boost from early exports may fade. Interest rates are expected to remain at 4.25% when the Bank of England meets next week.