UK Economy Faces Headwinds as Trade Growth Slows, Watchdog Downgrades Forecast
LONDON -โค Shadow Chancellorโ Rachel Reeves maintains that future trade โdeals willโค stimulate economic growthโ for the UK, despite a recent downgrade in productivity forecasts from the Officeโฃ for Budget Obligation (OBR). โThe OBR’s revised assessment, revealed Thursday at a Resolution Foundation event, cites rising tariffs and increasingโข global trade restrictions as contributing factors to the loweredโข outlook.
The OBR โฃnowโฃ projects global trade growth will decelerate from 3.7 percent in 2024โฃ to 2.3 percent in 2026, aligning with forecasts from โthe International Monetary Fund (IMF). This slowdown poses โฃa notable challenge โคto the UK, an economy heavily reliantโค on trade for growth, โand marks a departure from previous trends – the IMF is now โforecasting trade will fall as a share of GDP over the next five years, a frist for OBR chair Richard Hughes in his career. โฃ
Hughes warned that escalating U.S. tariffs โand broader global trade restrictions are creating “new global headwinds” for the โUK economy.”Trade wars are very bad things for everybody,” he stated,โ emphasizing the particular vulnerability of open economies likeโฃ Britain.
Reeves’โ optimism centers on the potential of future trade agreements to offset these negative pressures. However, โthe OBR’s assessment underscores the growing โขdifficulty of relying on trade as a primary engine forโ economic expansion in aโ climate of increasing protectionism โคand geopolitical uncertainty. The downgraded productivity forecast โขwill be factored into the upcoming budget impact assessment.
