Reeves faces pressure on tax promises as Trump tariffs threaten UK growth

EY Item Club downgrades UK growth forecast to 0.9% for 2025

Sahar Nazir
clock • 3 min read

Chancellor Rachel Reeves could be pushed into breaking Labour’s commitment not to raise taxes on workers as escalating trade tensions initiated by Donald Trump put Britain’s economic recovery at risk, according to EY Item Club.

Analysis from the EY Item Club has warned that the president's tariff plans could dent the UK's economic growth and discourage business investment. The independent economic forecaster has downgraded its UK GDP growth projection for 2025 from 1.6% to 0.9%, citing the likely impact of US tariffs on global trade and business confidence. The potential shortfall in tax revenues could erode the £9.9bn of fiscal headroom that Reeves has maintained under Labour's fiscal rules. EY Item Club chief economic adviser Matt Swannell said: "The government's fiscal headroom appeared narrow even bef...

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