The UK began 2025 under pressure, with production down and manufacturing and mining among the hardest hit. Food, metals, and repair services have held steady, but the industrial picture is weak overall. Construction has also dipped, highlighting wider uncertainty.
Logistics and manufacturing firms are especially wary, with US trade policy changes raising import duties and dampening investment. Some larger businesses have reported financial losses, pulled back on spending, and threatened growth targets.
Global trade tensions are weighing on the UK’s position as a trading hub. GDP growth is forecast at just 0.8% for 2025 and 2026, with tariffs and shifting alliances key concerns. Household savings and public spending may offer support, but high inflation is expected to peak at 3.6% in autumn, and persistent interest rates could stall recovery.
Job market pressures are also mounting, with employment likely to fall and wages easing as conditions rebalance. Political and fiscal constraints limit the Government’s ability to stimulate the economy, despite positive steps such as potential EU defence trade and a drone manufacturing deal in Hampshire.
In contrast, the services sector remains a source of strength. Health, retail, and administration growth is helping to stabilise the economy. Many service businesses are confident, expecting steady demand in the months ahead.
However, investment remains cautious across sectors as businesses wait for clarity on trade policy and economic direction. The Government’s ability to respond to challenges – from strikes to trade deals – will shape the UK’s prospects for the rest of the year.
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