Britain’s economy will be among the hardest hit by the global trade war and inflation is set to climb, the International Monetary Fund (IMF) has warned – as it slashed its UK growth forecast by a third.
In a sobering set of projections, the Washington-based organisation said it was grappling with “extremely high levels of policy uncertainty” – and the global economy would slow even if countries manage to negotiate a permanent reduction in tariffs from the US.
Echoing earlier warnings about the risks to the global financial system, the IMF said stock markets could fall even more sharply than they did in the aftermath of Donald Trump‘s “Liberation Day” tariffs announcement, when US and UK indices recorded some of their largest one-day falls since the pandemic.
It comes as Chancellor Rachel Reeves prepares to meet her US counterpart Scott Bessent at the IMF’s spring gathering in Washington this week.
She is hoping to negotiate a reduction to the 10% baseline tariff the US president has applied to all UK goods. Steel, aluminium and car exports face an additional 25% tariff.
As long as the world’s two largest economies are at war with each other, there will be considerable spillovers. The US and China account for 43% of the global economy.
If demand in either nation slows, that has ripple effects across the world. Tariff or no tariff, exporters to those markets will be hurt.
If China redirects its goods elsewhere, that could hurt domestic industries – jobs could be at stake.
US and Chinese investors might hit pause on global projects and stock market devaluations could hurt consumer confidence. Things could unravel quickly.
Against that backdrop, it is difficult to say with any certainty what would happen to the UK but, even if we find a way to sweet talk our way out of tariffs, the dark clouds of the global economy are moving in every direction.
Britain is an open and highly trade-sensitive economy (we have a trade-to-GDP ratio of around 65%) and global spillovers will rain on us.
Then there are the spillovers from the financial markets. The IMF warned that rising government borrowing costs were weighing on economic growth.
While rising UK bond yields are, in part, a reflection of investor unease over the UK’s growth and inflation outlook, they also reflect anxiety over the US trajectory.
It’s worth bearing all of this in mind if Chancellor Rachel Reeves emerges from her trip to Washington with a deal.
The Treasury would no doubt celebrate the achievement. After all, a reduction in tariffs could make a big difference to some industries, especially our car manufacturers who are currently grappling with a 25% levy on goods to their largest export market. However, it would not solve our problems.
In fact, it would barely make a difference to our overall GDP. Back in 2020, the government estimated that a free trade deal with the US would boost the UK economy by just 0.16% over the next 15 years.
And overall GDP does matter. The chancellor desperately needs economic growth to support the country’s ailing public finances (when the economy grows, so do government tax receipts).
She will know better than most that the prize the US has to offer is comparatively small, so she should weigh up the costs of any deal carefully.
The IMF presented a range of forecasts in its latest World Economic Outlook. Its main case looked at the period up to 4 April, after Mr Trump announced sweeping tariffs on countries across the world, ratcheting up US protectionism to its highest level in a century.
If the president were to revert to this policy framework, global growth would fall from 3.3% last year to 2.8% this year, before recovering to 3% in 2026.
In January, the IMF was predicting a rate of 3.3% for both years.
Nearly all countries were hit with downgrades, with the US expected to grow by just 1.8% this year, a downgrade of 0.9 percentage points.
Mexico was downgraded by 1.7 percentage points, while China and Canada are forecast to slow by 0.6 percentage points and Japan by 0.5 percentage points.
The UK economy is expected to grow by just 1.1% this year, down 0.5 percentage points from the 1.6% the IMF was predicting in January. Growth picks up to 1.4% next year, still 0.1 percentage points lower than the January forecast.
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2:22
Will tariffs hit UK growth?
Along with recent tariff announcements, the IMF blamed the UK’s poor performance on a rise in government borrowing costs, which has in part been triggered by growing unease among investors over the fate of the US economy.
When borrowing costs rise, the chancellor has to rein in public spending or raise taxes to meet her fiscal rules. That can weigh on economic growth.
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1:07
Trump: Tariffs are making US ‘rich’
It also pointed to problems in the domestic economy, mainly “weaker private consumption amid higher inflation as a result of regulated prices and energy costs”.
In a blow to the chancellor, the IMF warned that the UK would experience one of the largest upticks in inflation because of utility bill increases that took effect in April.
It upgraded its inflation forecast by 0.7 percentage points to 3.1% for 2025, taking it even higher above the Bank of England’s 2% target and deepening the dilemma for central bankers who are also grappling with weak growth.
Meanwhile, inflation in the US is likely to jump one percentage point higher than previously forecast to 3% in 2025 on the back of higher tariffs.
The IMF forecast period ended on 4 April. That was before the US president paused his reciprocal tariffs on countries across the world while ratcheting up levies on China.
In a worrying sign for finance ministers across the world, as they attempt to negotiate a deal with the US administration, the IMF said the global economy would slow just the same if Mr Trump were to make his temporary pause on reciprocal tariffs permanent.
That is because higher tariffs between the US and China, which together account for 43% of the global economy, would have spillover effects on the rest of the world that offset the benefits to individual countries.
“The gains from lower effective tariff rates for those countries that were previously subject to higher tariffs would now be offset by poorer growth outcomes in China and the United States – due to the escalating tariff rates – that would propagate through global supply chains,” the IMF said.
In response, Chancellor Rachel Reeves said:
“This forecast shows that the UK is still the fastest-growing European G7 country. The IMF have recognised that this government is delivering reform which will drive up long-term growth in the UK, through our plan for change.
“The report also clearly shows that the world has changed, which is why I will be in Washington this week defending British interests and making the case for free and fair trade.”
A partnership of the country’s leading social care and end of life organisations has told Sky News of their deep frustration at being excluded from important discussions around the assisted dying debate – describing the proposed change to the law as “unworkable, unaffordable and naive”.
The Coalition of Frontline Care for People Nearing the End of Life is worried about the impact of introducing assisted dying will have on their three million-strong workforce, which they say is on the frontline for delivering care to terminally ill adults.
The partnership includes The Gold Standards Framework Charity (GSF), National Care Forum (NCF), British Geriatric Society (BGS), Care England (CE) and the Community Hospital Association.
It submitted evidence at the committee stage of the Terminally Ill Adults (End of Life) Bill, but was not called to give evidence
Professor Martin Vernon, consultant geriatrician and spokesperson for ethics and law at the British Geriatric Society, told Sky News: “This is a huge problem for us.
“The majority of people this law will impact on are going to be older people with complex needs, and there has been virtually no engagement in the consultation process around this proposed legislation.”
Image: Professor Martin Vernon says the majority affected by the bill will be older with complex needs
Professor Vernon and his coalition colleagues are especially concerned about sick and vulnerable adults being pressured into making choices.
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“We then may see, increasingly, older people with life-limiting diagnoses like dementia, like frailty, feeling the need to opt for assisted dying or indeed feeling coerced either by their circumstances or societally,” he added.
“This may place a heavy burden on some individuals to choose assisted dying when, actually, the creation of better alternatives – supportive care, and palliative care to enable them to have a dignified and comfortable last few years of life should be the way to go.”
Caroline Southgate, founder and managing director of home care company Doris Jones, told Sky News there was simply not enough information about the impact assisted dying would have on her staff.
Image: ‘The way that the bill is presented doesn’t give us enough information,’ Caroline Southgate says
“I think we are concerned that we don’t have enough clarity about how we would train staff, how we support people if they make that decision,” she said.
“At the moment, the way that the bill is presented doesn’t give us enough information to know how we would deal with those issues.
“If someone chooses this route, all I need to know is what’s my role, where are my boundaries?”
Mrs Southgate is also worried about her staff being accused of coercion. Because of the nature of their work, home carers build up a strong bond with the people they tend to, often seeing them multiple times a day.
And sometimes, they might be the only contact their service users have.
“I think we’ve got lots and lots of experience of being in homes with people, dealing with families, who trust us to look after the person who needs care and support at home,” she added.
“I need to know that we would be insured and protected should a family decide that one of our staff was accused of coercing someone, or the other way around, talking someone out of a situation.
“We really need a lot more information to make that safe for us and to make sure that our staff are really well supported.”
Katy Betz works for Mrs Southgate. She is a trained nurse originally from Germany but has lived and worked as a carer in England for over twenty years.
Kate loves what she does, but echoes the same concerns expressed by her employer: Assisted dying could change the relationship she has with her service users.
Driving along Southend’s seafront, she explains there is little else she and her care colleagues talk about these days.
Image: Katy Betz tells Sky News the debate on assisted dying is all she and her colleagues talk about
“It is important”, she says. “Even within my friendship group, everyone has got a different opinion, a strong opinion actually.
Katy says she needs more detail: “More training, safeguarding – what do we do? Where do we go? Who needs to be informed about the client’s decision?
“You are there to make their life, and their end of life, bearable and as good as possible. I can’t explain how I deal with it, but I think you just have to be born to deal with it.”
Katy is on her way to see John and Brenda Barber for one of their daily visits. Brenda is 85 and John is 90.
John took Brenda on their date to a jive dance in Southend.
He was twenty years old and had just returned from army service in Gibraltar. Brenda was just sixteen.
They have been inseparable ever since.
John’s arthritis makes every day tasks almost impossible, and he says if he did not have a carer like Katy, his life would be intolerable.
Image: Paul Barber said his life would be intolerable without Katy Betz
He says: “It’s becoming increasingly difficult with different parts of my body. My wife and I are together and that’s what we want. We would never want to be separated.”
There’s a pause while he reflects on that thought. “That’s despite the bickering,” he says before breaking into a mischievous laugh.
The bond that is shared between Katy, John and Brenda is clear to see. They are worried that this might change irreversibly if the assisted dying law is passed.
The Terminally Ill Adults (End of Life) Bill returns to the House of Commons on Friday, where it will face greater scrutiny.
Earlier this week, two Royal Colleges, Physicians and Psychiatrists, withdrew support for the bill, saying it was “not fit for purpose”.
But campaigners in favour of assisted dying have told Sky News the bill includes more protections and safeguards for all dying people than any other jurisdiction where the choice is legal.
Sarah Wootton, chief executive for Dignity in Dying, said: “MPs voted by a clear majority to progress Kim Leadbeater’s Bill in November because they recognised that the blanket ban on assisted dying is failing dying people and their families.
“Every year, dying people are forced to endure unbearable pain, despite good care, travel overseas to die alone, or take matters into their own hands, often dying violent and lonely deaths without support.
“This Bill – already hailed as the strongest in the world – has been strengthened even further during committee stage, with amendments accepted to involve a range of skilled professionals in every application, specific training requirements around coercion, and that assisted dying can only be discussed within the context of all end of life options.”
Sir Keir Starmer is in Albania to announce an expanded crackdown on migrant smuggling gangs in the Balkans – a key staging post on the route to Britain.
Sir Keir is relying on “smashing the gangs” as the government’s policy to tackle small boat crossings, which remain at a record high this year; passing the 10,000 mark last month.
But working with officials in Albania is seen as a success story in stopping migration at source, partly due to the actions of the previous Conservative government which Sir Keir will build on.
In 2022, arrivals from Albania accounted for around a third of all small boat arrivals – a higher number than from any other country.
Over the past three years, those numbers have been cut by 95%. The number of Albanians returned to their home country has also more than doubled to 5,294 last year, from just over 2,000 two years’ earlier.
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The prime minister will join Edi Rama, prime minister of Albania since 2013, at the Port of Durres on Thursday to see UK-backed efforts to tackle smuggling gangs and the criminal activities that fund them.
A programme to detect migrants attempting to travel using fake or stolen documents will be expanded, with the UK donating new anti- forgery machines. The government will also invest a further £1m in DNA technology to detect serious criminals on the streets of the UK.
Sir Keir is also expected to express concerns about a “revolving door effect” in which a migrant is returned home, only to evade law enforcement and leave the country again. He will support programmes in northern Albania – where migrants come from – to reintegrate young people and provide them with employment opportunities, the government said.
The prime minister will announce that the joint migration taskforce, with Albania and Kosovo, signed at the end of 2022, will be expanded to include North Macedonia and Montenegro.
The National Crime Agency will share intelligence with law enforcement agencies in these countries and deploy UK funded drones to detect gangsters funnelling migrants through the Western Balkans corridor and on to the UK.
The countries of the Western Balkans – including Serbia, whose government signed an agreement with Sir Keir last year – have for around five years been the key corridor to Europe for migrants from the Middle East, Asia and Africa.
Sir Keir will say: “Global challenges need shared solutions, and the work the UK and Albania are doing together is delivering security for working people in both countries.
“Our joint work to deter, detect and return illegal migrants is further proof that intervening upstream to protect British shores and secure our borders is the right approach.
“Every step we take to tackle illegal migration overseas, cripple the criminal networks that facilitate it and stem the finance streams that fund it is delivering safer streets in the UK, and reducing the strain on taxpayer funded services.”
On Friday the prime minister will attend the European Political Community summit in the capital Tirana, a forum for European leaders to discuss security challenges in the wake of the war in Ukraine.
It’s expected to be a chance for the UK to discuss key points of a forthcoming defence pact with the EU and the terms of a “reset” of relations ahead of a summit in London next Monday.
But in a leaked recording obtained by Sky News, Chris Philp, now shadow home secretary, said Britain’s exit from the EU – and end of UK participation in the Dublin agreement which governs EU-wide asylum claims – meant they realised they “can’t any longer rely on sending people back to the place where they first claimed asylum”.
Mr Philp appeared to suggest the scale of the problem surprised those in the Johnson government.
Image: Chris Philp is the shadow home secretary. Pic: Reuters
“When we did check it out… (we) found that about half the people crossing the Channel had claimed asylum previously elsewhere in Europe.”
In response tonight, the Tories insisted that Mr Philp was not saying the Tories did not have a plan for how to handle asylum seekers post Brexit.
Mr Philp’s comments from last month are a very different tone to 2020 when as immigration minister he seemed to be suggesting EU membership and the Dublin rules hampered asylum removals.
In August that year, he said: “The Dublin regulations do have a number of constraints in them, which makes returning people who should be returned a little bit harder than we would like. Of course, come the 1st of January, we’ll be outside of those Dublin regulations and the United Kingdom can take a fresh approach.”
Mr Philp was also immigration minister in Mr Johnson’s government so would have been following the debate closely.
Image: Philp was previously a close ally of Liz Truss. Pic: PA
In public, members of the Johnson administration were claiming this would not be an issue since asylum claims would be “inadmissible”, but gave no details on how they would actually deal with people physically arriving in the country.
A Home Office source told journalists once the UK is “no longer bound by Dublin after the transition”, then “we will be able to negotiate our own bilateral returns agreement from the end of this year”.
This did not happen immediately.
In the summer of 2020, Mr Johnson’s spokesman criticised the “inflexible and rigid” Dublin regulations, suggesting the exit from this agreement would be a welcome post-Brexit freedom. Mr Philp’s comments suggest a different view in private.
The remarks were made in a Zoom call, part of a regular series with all the shadow cabinet on 28 April, just before the local election.
Mr Philp was asked by a member why countries like France continued to allow migrants to come to the UK.
He replied: “The migrants should claim asylum in the first safe place and that under European Union regulations, which is called the Dublin 3 regulation, the first country where they are playing asylum is the one that should process their application.
“Now, because we’re out of the European Union now, we are out of the Dublin 3 regulations, and so we can’t any longer rely on sending people back to the place where they first claimed asylum. When we did check it out, just before we exited the EU transitional arrangements on December the 31st, 2020, we did run some checks and found that about half the people crossing the channel had claimed asylum previously elsewhere in Europe.
“In Germany, France, Italy, Spain, somewhere like that, and therefore could have been returned. But now we’re out of Dublin, we can’t do that, and that’s why we need to have somewhere like Rwanda that we can send these people to as a deterrent.”
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1:42
Has Brexit saved the UK from tariffs?
Mr Johnson announced the Rwanda plan in April 2022 – which Mr Philp casts as the successor plan – 16 months after Britain left the legal and regulatory regime of the EU, but the plan was blocked by the European Court of Human Rights.
Successive Tory prime ministers failed to get any mandatory removals to Rwanda, and Sir Keir Starmer cancelled the programme on entering Downing Street last year, leaving the issue of asylum seekers from France unresolved.
Speaking on Sky News last weekend, Home Secretary Yvette Cooper said there has been a 20% increase in migrant returns since Labour came to power, along with a 40% increase in illegal working raids and a 40% increase in arrests for illegal working.
Britain’s membership of the EU did not stop all asylum arrivals. Under the EU’s Dublin regulation, under which people should be processed for asylum in the country at which they first entered the bloc.
However, many EU countries where people first arrive, such as Italy, do not apply the Dublin rules.
The UK is not going to be able to participate again in the Dublin agreement since that is only open to full members of the EU.
Ministers have confirmed the Labour government is discussing a returns agreement with the French that would involve both countries exchanging people seeking asylum.
Asked on Sky News about how returns might work in future, the transport minister Lilian Greenwood said on Wednesday there were “discussions ongoing with the French government”, but did not say what a future deal could look like.
She told Sky News: “It’s not a short-term issue. This is going to take really hard work to tackle those organised gangs that are preying on people, putting their lives in danger as they try to cross the Channel to the UK.
“Of course, that’s going to involve conversations with our counterparts on the European continent.”
Pressed on the returns agreement, Ms Greenwood said: “I can confirm that there are discussions ongoing with the French government about how we stop this appalling and dangerous trade in people that’s happening across the English Channel.”
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A Conservative Party spokesman said: “The Conservative Party delivered on the democratic will of this country, and left the European Union.
“The last government did have a plan and no one – including Chris – has ever suggested otherwise.
“We created new deals with France to intercept migrants, signed returns agreements with many countries across Europe, including a landmark agreement with Albania that led to small boat crossings falling by a third in 2023, and developed the Rwanda deterrent – a deterrent that Labour scrapped, leading to 2025 so far being the worst year ever for illegal channel crossings.
“However, Kemi Badenoch and Chris Philp have been clear that the Conservatives must do a lot more to tackle illegal migration.
“It is why, under new leadership, we are developing g new policies that will put an end to this problem – including disapplying the Human Rights Act from immigration matters, establishing a removals deterrent and deporting all foreign criminals.”