Following weeks of turmoil and uncertainty, in which the pound sank against the euro and dollar, yesterday saw it regain lost ground. By the end of Monday trading, sterling was up more than 0.8% on both EUR and USD.
While the impact of tariffs is still being felt, there is mixed UK economic news closer to home. This morning, data from the British Retail Consortium revealed that, compared to this time last year, retail sales were up by 0.9% – another positive sign following last week’s GDP figures showing 0.5% growth in the UK economy.
However, a survey published by the Institute of Chartered Accountants in England and Wales shows US president Donald Trump’s tariffs and UK Chancellor Rachel Reeves’ increased taxes on employers has seen business confidence fall to -3, the lowest level since the end of 2022.
When the Chancellor announced plans to increase employers’ National Insurance contributions business owners warned this would mean they had to cut staff. Today’s HMRC payroll change data reveals a 78,000 decline, the largest monthly drop since May 2020. However, the Office for National Statistics also showed UK employment increased by 206,000, beating expectations of a fall from January’s 144,000. Unemployment remained steady at 4.4% for the third month in a row and average earnings increased by 5.9%.
US traders were bolstered last week by Trump’s decision to exempt many electronics products from his 145% tariff on Chinese imports. Though that high was short-lived as he confirmed on Monday that the exempted devices would be moved into a different tariff “bucket”. As is his form, he didn’t say when this transition would happen or how high the tariff would be.
As a result of Trump’s on-again, off-again tariffs and the response by countries around the globe, Goldman Sachs’ chief executive, David Solomon, says “The prospect of a [US] recession has increased”. The New York Federal Reserve published figures yesterday showing consumers expect the prices of food, medical care and rent to increase.
The euro lost nearly 0.9% against the pound and over 0.25% against the dollar on Monday. The European economy is still reckoning with the impact of Trump’s tariffs, particularly on its automotive industry.
As an indication of the damage, later this morning, the Centre for European Economic Research will publish the German economic sentiment index, which is forecast to plummet from 51.6, the highest level since February 2022, to 9. Anything above a 0 shows positive sentiment, but it’s still a huge drop optimism if it comes to pass.
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