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