DONALD Trump’s punishing tariffs will wipe a staggering £8.5billion off Britain’s economy, the world’s top financial watchdog warned today.
The International Monetary Fund said UK growth will be dragged down by “global trade tensions,” including “the direct impact of remaining US tariffs on the UK”.
EPAPrime Minister Sir Keir Starmer[/caption]
Despite Sir Keir Starmer hailing the UK-US trade deal as a major win, the IMF’s latest assessment predicts the hit will knock 0.3 per cent off GDP by 2026 – equal to around £8.5bn based on today’s economic output.
But in a much-needed boost for embattled Chancellor Rachel Reeves, the watchdog upgraded its forecasts and hailed her plans as “credible and growth-friendly”.
It now expects the UK to grow by 1.2 per cent in 2025 and 1.4 per cent in 2026 – thanks to “monetary easing, positive wealth effects, and an uptick in confidence”.
Officials also welcomed the October Budget’s infrastructure boost, saying higher public investment “will also help support growth”.
But the global watchdog also issued a stark warning about the road ahead.
It flagged “significant risks” to the Chancellor’s fiscal plans, including market turmoil, spending pressures and the threat of global shocks.
In a sobering assessment, it said Britain faces an 8 per cent surge in public spending by 2050 – mainly due to rising health and pension costs.
The IMF warned: “There is limited space to finance this spending through extra borrowing, given high debt and elevated borrowing costs.”
Without tax hikes, “tough policy decisions on spending priorities and the role of the state in certain areas will be needed” to keep the public finances under control.
Responding to the forecast, the Chancellor said: “The UK was the fastest growing economy in the G7 for the first three months of this year and today the IMF has upgraded our growth forecast.
“We’re getting results for working people through our Plan for Change – with three new trade deals protecting jobs, boosting investment and cutting prices, a pay rise for three million workers through the National Living Wage, and wages beating inflation by £1,000 over the past year.”
Earlier this month, Sir Keir struck a new deal with the US, aimed at easing the blow of Trump’s tariffs.
While not a full-blown free trade deal, it will cut barriers on key UK exports like steel, chemicals, and energy – and reduce tariffs on British cars from 27 to 10 per cent.
Talks continue between the two sides on a wider trade deal.
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