[Date: 05/06/2025]
Introduction
In the wake of recent U.S. trade policy shifts, particularly the tariffs introduced by President Donald Trump in April 2025, British businesses have demonstrated notable resilience. The Bank of England’s latest Decision Maker Panel (DMP) survey reveals a significant decline in concerns over U.S. trade policy among UK firms, indicating a shift in business sentiment and expectations.
Key Findings from the Bank of England’s DMP Survey
- Reduced Concern Over U.S. Trade Policy: Only 12% of British businesses now consider U.S. trade policy a top source of uncertainty, a sharp decline from 22% in the previous month.
- Minimal Expected Impact on Business Operations: A substantial 70% of surveyed firms anticipate no significant impact from U.S. tariffs on their sales, pricing, or investment strategies.
- Moderate Adjustments Anticipated: While the majority foresee stability, 22% expect a decrease in sales, 20% plan to reduce investments, and 15% anticipate lowering prices in response to the new trade measures.
Wage and Price Expectations
- Wage Growth Projections: Firms expect to increase wages by 3.7% over the next year, marking the lowest forecast since the Bank began regular tracking in 2022.
- Actual Wage Increases: Over the past 12 months leading up to May, businesses reported a 4.8% wage increase, slightly below the national average of 5.6% recorded in the first quarter.
- Price Growth Expectations: Businesses anticipate raising prices by 3.7% in the coming year, a slight decrease of 0.2 percentage points from April’s expectations.
Broader Economic Context
The UK’s service sector, a significant component of the economy, has shown signs of recovery. The S&P Global Purchasing Managers’ Index (PMI) for services rose to 50.9 in May from 49.0 in April, indicating a return to growth.
Additionally, business confidence has rebounded, with Lloyds Bank’s business barometer increasing by 11 points to 50% in May, the highest in nine months.
Conclusion
Despite initial concerns, British businesses are adapting to the evolving U.S. trade landscape with resilience. The decline in uncertainty and stable expectations for wages and prices suggest that UK firms are navigating these changes with cautious optimism. As global trade dynamics continue to evolve, the adaptability and confidence of British businesses will be crucial in sustaining economic growth.
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