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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.

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HARD TO SEE A WIN FOR REEVES AHEAD


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Gurpreet Narwan

Business and economics correspondent

@gurpreetnarwan

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.

IMF

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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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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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.

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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.”

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Two killed in stabbing at business premises in London

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Two killed in stabbing at business premises in London

Two men have died after a stabbing in central London.

Police were called to a business premises in Long Lane, Southwark, at 1pm on Monday, where they found four people had been stabbed.

A 58-year-old man died at the scene while three others were taken to hospital, the Metropolitan Police said. These included a 27-year-old man who has since died.

A third man, who is in his thirties, remains in hospital with injuries described as non-life-threatening.

Another man in his thirties, who has been detained in connection with the incident, remains in a life-threatening condition in hospital.

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Detective Chief Superintendent Emma Bond said: “Our investigation is in the early stages and we are working hard to understand the full circumstances of this shocking incident.

“At this point, we do not believe it to be terrorism-related and there is no further risk to the public.”

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Lionesses celebrate Euros triumph at ‘very special’ Downing Street reception

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Lionesses celebrate Euros triumph at 'very special' Downing Street reception

The red carpet was rolled out at No 10 on Monday evening as the Lionesses attended a reception to celebrate their Euro 2025 victory.

The England squad went straight to Downing Street after touching down at Southend Airport in Essex less than 24 hours after they defeated Spain in a penalty shootout in Sunday’s final.

Led by captain Leah Williamson, who proudly clutched the trophy, the side posed for pictures outside No 10 before being greeted by Deputy Prime Minister Angela Rayner.

England women's football team pose for a photo in Downing Street, London, as they attend a reception at No 10, Pic: PA
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The England squad outside No 10. Pic: PA

England's team captain Leah Williamson carries the trophy when leaving a special reception, to celebrate their victory in the Women's Euro 2025 final, at Downing Street in London, Monday, July 28, 2025. (AP Photo/Kirsty Wigglesworth)
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Leah Williamson carries the trophy. Pic: AP

Speaking to Sky News correspondent Ashna Hurynag after the 40-minute reception, England manager Sarina Wiegman described the celebration as “very, very special”.

“To be able to go inside and also be in the garden there, [was] really nice,” she said. “They had put up pictures of us to show what we had done in the Euros… it was very, very special.”

Some people on social media have called for the England boss – who is from the Netherlands – to get an honorary damehood, but Wiegman told Ashna Hurynag that she “hasn’t thought about that”.

“I feel so much respect from England and from the Royal Family too, I think that’s the most important thing, feeling valued,” she said.

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Weigman also joined some of the players to videocall Sir Keir Starmer, who was in Scotland with Donald Trump.

England attend Downing Street reception. Pic: Reuters
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England manager Sarina Wiegman and some of the players on a video call with Sir Keir Starmer. Pic: Reuters

England manager Sarina Wiegman speaks at a reception at No 10 Downing Street, London. Pic: Richard Pohle/The Times/PA Wire
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Pic: PA

Angela Rayner reacts during a reception to celebrate England's victory in the Women's EURO 2025, at Downing Street in London. Reuters
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Angela Rayner congratulates some of the players. Pic: Reuters

In a speech at the reception, the manager quipped: “I have to make my apologies [for giving] you lots of heart attacks.”

“We made it through and that’s why we’re here now,” she continued.

“The team is just incredible, we won the Euros but making the final, we’re already legendary. Thank you so much for having us here.”

As the Lionesses left Downing Street, some stopped to try and meet another famous feline – Larry the Cat.

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Sarina Wiegman and Leah Williamson with the trophy as she and members of the England team attend a reception at Downing St. Pic: PA
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Sarina Wiegman and Leah Williamson in the garden at No 10. Pic: PA

England's Esme Morgan, Anna Moorhouse and Grace Clinton try and get Larry the Cat's attention as they leave No.10 Downing Street. Pic: PA
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England’s Esme Morgan, Anna Moorhouse and Grace Clinton try and get Larry the Cat’s attention. Pic: PA

The celebrations will continue on Tuesday afternoon with an open-top bus parade through central London before the team gather outside Buckingham Palace.

The Lionesses retained their Women’s Euros title on Sunday night by beating Spain in Basel, Switzerland.

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Behind the scenes after Lionesses’ win

Mariona Caldentey put Spain 1-0 ahead in the first half, but England’s Alessia Russo levelled the score in the 57th minute.

The game finished 1-1 after 90 minutes, with the score remaining the same at the end of extra-time.

The match then went to a penalty shootout, which the Lionesses won 3-1.

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‘No other drug does this amount of damage so quickly to your kidneys and bladder’: How party drug is destroying lives

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