The UK economy shrank more than expected in April as the worst of President Trump’s tariffs hit.

The standard measure of economic output (GDP) contracted a sharp 0.3% in April, data from the Office for National Statistics (ONS) showed.

During the month, Mr Trump’s so-called “Liberation Day” applied steep tariffs to countries around the world and sparked a trade war with China, the world’s second-largest economy.

The outcome is worse than expected by economists. A contraction of just 0.1% had been forecast by economists polled by the Reuters news agency.

It’s also down from the growth of 0.2% recorded in March.

Blow for Reeves

It’s also bad news for Chancellor Rachel Reeves, who has made the push for economic growth her number one priority. Speaking to Sky News following the news, she described the figures as “disappointing”.

Additional costs on businesses were also levied during the month, as higher minimum wages and employer national insurance contributions took effect, which businesses told the ONS played a part in their performance.

Why?

The biggest part of the economy, the services sector, contracted by 0.4%, and manufacturing dropped 0.9%.

There was the largest ever monthly fall in goods exported to the United States, the ONS said.

Decreases were seen across most types of goods due to tariffs, it added.

Higher stamp duty depressed house buying and meant legal and real estate firms fared badly in the month.

After a strong showing in the first three months, car manufacturing performed poorly.

Rachel Reeves is setting out her spending review in the House of Commons.  

It outlines how much funding individual government departments will receive over the next three years and state infrastructure investment for the next four years.

The last spending review took place during the COVID-19 pandemic, and before that, in 2015.

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Here’s what’s been announced so far – please refresh this page for updates.

Defence

A major recipient of funds is the Ministry of Defence. Defence spending will rise from 2.3% of gross domestic product (GDP) to 2.6% by 2027. An £11bn uplift and a £600 million uplift for security and intelligence agencies.

Within that there’ll be £4.5bn of investment in munitions made in Glasgow and more than £6bn to upgrade to nuclear submarine production.

Border security

The chancellor goes onto border security, where she says funding will increase with up to £280m more per year by the end of the spending review for the new Border Security Command.

She said the Home Secretary Yvette Cooper will end the costly use of hotels to house asylum seekers by 2029.

The chancellor says funding she has announced today, including from the transformation fund, will also cut the asylum backlog, see more appeal cases heard and “return people who have no right to be here”.

This will save the taxpayer £1bn a year, she says.

Energy

The biggest nuclear building programme for half a century has been announced with £14.2bn being poured into the Sizewell C nuclear power station on the Suffolk coastline.

A total of £14bn will go to the Sizewell C nuclear power plant. Another £2.5bn will be invested in a new small modular reactor programme.

A commitment to nuclear was reiterated, with £30bn allocated.

Science and technology

Moving on from energy and infrastructure, the chancellor says she wants the country’s high tech industries in Britain to continue to lead the world in the years to come.

Research and development funding will go to a record high of £22bn a year by the end of the spending period.

The government’s artificial intelligence action plan will receive £2bn.

Housing

Government funding of social and affordable housing has been allocated £39bn – which she called the “biggest cash injection into social housing in 50 years”.

She says she is providing an additional £10bn for financial investments, including to be delivered through Homes England, to help unlock hundreds of thousands more homes.

Transport

The chancellor announced £15bn for new rail, tram and bus networks across the West Midlands and the North. She’s also green-lit a new rail line between Liverpool and Manchester.

The chancellor will unveil the spending review at lunchtime – with plans to invest billions of pounds across the UK.

However, Rachel Reeves will admit that “too many people” are yet to feel the benefits of the government’s work so far.

In the House of Commons, she will confirm the budgets for each government department over the next three years – with boosts expected for schools, defence and the NHS.

Ms Reeves will vow to spend vast sums of money across the country to “ensure that renewal is felt in people’s everyday lives, their jobs, their communities”.

She is also pledging to set out “reforms that will guarantee towns and cities outside London and the South East can benefit from new investment”.

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Ms Reeves is expected to say: “This government is renewing Britain. But I know too many people in too many parts of the country are yet to feel it.

“This government’s task – my task – and the purpose of this spending review – is to change that … So that people can see a doctor when they need one. Know that they are secure at work. And feel safe on their local high street.

“The priorities in this spending review are the priorities of working people. To invest in our country’s security, health and economy so working people all over our country are better off.”

Watch live coverage of the spending review on Sky News from 12pm

Ms Reeves will formally confirm “the biggest-ever local transport infrastructure investment in England’s city regions” – worth £15.6bn – as well as £86bn to “boost science and technology”, including by building the Sizewell C nuclear power station.

She will also announce the extension of the £3 cap on bus fares, Sky News understands. The cap – which Labour lifted from £2 – was due to expire at the end of this year.

Meanwhile, £39bn for a new Affordable Homes Programme over the next 10 years is set to be unveiled, with the government seeking to ramp up housebuilding to hit its manifesto pledge of 1.5 million new homes by the end of this parliament.

The chancellor will argue: “The choices in this spending review are possible only because of the stability I have introduced and the choices I took in the autumn.”

One of those choices included cutting the winter fuel allowance for almost all pensioners – a decision the government has now U-turned on at a cost of £1.25bn. However, she is not expected to explain where that money will come from until the budget this autumn.

Ms Reeves will tell MPs: “I have made my choices. In place of chaos, I choose stability. In place of decline, I choose investment. In place of retreat, I choose national renewal.

“These are my choices. These are this government’s choices. These are the British people’s choices.”

Read more:
Why the spending review is a massive deal
Five things you need to know

But shadow chancellor Sir Mel Stride said this will be “the ‘spend today, tax tomorrow’ spending review” – arguing that the government is “spending money it doesn’t have, with no credible plan to pay for it”.

He said in a statement: “Rachel Reeves talks about ‘hard choices’ – but her real choice has been to take the easy road. Spend more, borrow more, and cross her fingers. This spending review won’t be a plan for the future – it will be a dangerous gamble with Britain’s economic stability.”

He went on: “Today, we’ll hear slogans, spin and self-congratulation – but not the truth. Don’t be fooled. Behind the spin lies a dangerous economic gamble that risks the country’s financial future.”