In April 2025, the U.K. economy contracted by 0.3%, marking the sharpest decline in nearly two years, influenced by global trade tariffs and domestic tax increases.

This contraction followed a modest growth of 0.2% in March, primarily driven by a slump in the services sector after the government ended a tax break for home buyers.

A significant factor in this downturn was a decrease in real estate and legal activities, which contributed 0.2 percentage points to the overall fall.

The economic downturn was exacerbated by President Donald Trump's tariffs, which led to a £2 billion ($2.7 billion) drop in U.K. goods exports to the U.S. in April.

As a result, the total value of U.K. exports to the U.S. fell to £4.1 billion, the lowest since February 2022, with notable declines in the automotive, chemicals, and metals sectors.

Despite being relatively unaffected compared to other nations, the U.K. still faced increased tariffs on exports to the U.S., which are now higher than pre-April levels, creating ongoing uncertainty for businesses.

In contrast, U.S. imports to the U.K. decreased by £400 million to £4.7 billion, allowing the U.S. to regain a trade surplus with the U.K. for the first time since May 2024.

Chancellor Rachel Reeves described April as a 'challenging month,' highlighting high uncertainty around tariffs affecting exports and production.

Policymakers at the Bank of England are grappling with persistent inflation and a sluggish economy, with a decision on interest rates expected soon.

While the U.K. has been relatively spared from severe tariffs, the baseline tariff remains the only one applied to British goods, and tariffs on U.K. steel and aluminum have been removed.

The U.K. faced a 10% 'reciprocal tariff' from the U.S., despite maintaining a relatively balanced trading relationship regarding goods.

Economists predict continued weak growth for the remainder of 2025, with the Bank of England forecasting a mild growth of 1% for the year ahead.