UK trade deals to boost growth, KPMG reports

UK growth may surpass expectations due to trade deals. UK growth could increase due to agreements with the US and EU, according to a City consultancy. Many forecasters had reduced the UK’s economic predictions following President Trump’s ‘Liberation Day’, with organizations like the IMF predicting a 0.3% GDP decline. However, a new forecast indicates potential growth due to reduced trade frictions and clearer investment prospects. KPMG economist Yael Selfin suggests UK growth could reach 1.2% this year, up from a previous 0.8% forecast. The Big Four consultancy also anticipates a 3% rise in investment and an unemployment rate of 4.4% this year, despite recent statistics showing it at 4.5%. This positive outlook on UK trade policies could buoy Chancellor Reeves ahead of a critical spending review. Selfin highlighted that a US deal positions the UK uniquely in Europe and alleviates tariff concerns. However, UK businesses should consider indirect impacts from global trade tensions and potential supply chain issues. Inflation is expected to decrease to 2% by mid-next year, a more optimistic view than the Bank of England’s. Governor Andrew Bailey has expressed caution on interest rate adjustments, citing uncertainty. KPMG analysts predict the Bank will implement two more rate cuts this year, with rates dropping to 3.25% by the end of 2026. The consultancy also cautions that European governments may introduce unpopular tax hikes to support increased defence spending, projected to reach 3% of UK GDP by 2035.