There are also downside risks for the government’s fiscal and macroeconomic forecasts, making it likely that the Chancellor of the Exchequer might need to further adjust her policies in the upcoming Autumn Budget. Market expectations already reflect the possibility of additional tax measures, which could dampen the economy.
The ‘reciprocal’ US tariff announcements are set to further weigh on the UK’s open economy. The newly imposed 10% US tariffs on UK exports (on GBP 60bn of exports to the United States last year or 2.1% of GDP) alongside 25% tariffs on steel and aluminium effective since last month present downside risks for the rating agency’s UK growth forecasts of 1.0% for 2025 and 1.3% for 2026.
Borrowing costs have increased since last October: higher interest expenditure having effectively used up all of the GBP 9.9bn fiscal headroom left from the 2024 Autumn Budget. Scope Ratings (Scope) forecasts net interest payments increasing to 8.3% of general…
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