The manufacturing sector is a major drag on the economy. The S&P PMI for April contracted for the 7th consecutive month to 45.4, with exports recording their biggest decline since May 2020. The combination of Trump - era tariffs and the 7% increase in the minimum wage from April, which has raised employers' social security costs, has led to the fastest growth in input costs in 15 months. As a result, firms' pricing power has been forced up to a two - year high. Meanwhile, the consumer side is showing signs of weakness. In March, net unsecured lending increased by £0.9 billion, lower than the expected £1.2 billion. Capital Economics points out that household spending is becoming more cautious.
Facing trade frictions and inflationary pressures, the Bank of England is likely to cut interest rates by 25 basis points to 4.25% next week. The IMF has adjusted the UK's growth forecast for 2025 to 1.1%, which is still better than that of major euro - zone economies such as France, Germany, and Italy.
