Some cautiously welcome news for traders

As the economy stands to benefit from an easing of trade tensions and lower uncertainty arising from potential trade agreements with some of its key partners, the UK economic outlook could brighten over the next two years.

This is the main finding of the latest European Economic Outlook published by KPMG which also notes that inflation is set to return to 2% by the middle of 2026.

KPMG European Chief Economist, Yael Selfin, said: “The US trade agreement puts the UK in a unique position in Europe, which may help ease some worries about further tariffs arriving in the summer. However, UK businesses will need to be mindful of indirect impacts through rising trade tensions in other parts of the global economy as well as potential supply chain distortions affecting operations.”

The agreement reached with the United States looks more important following President Trump’s announcement that his decision to double steel and aluminium tariffs from 25% to 50% will not affect UK exports provided the UK-US deal comes into force. However, he has warned that he could still increase the tariffs if he “determines that the United Kingdom has not complied with relevant aspects” of the agreement.

The British Chambers of Commerce (BCC) has also issued an economic forecast which shows that UK exports are projected to grow by 2% in 2025 (revised from –0.5% in the last forecast), 2.1% in 2026 and 2.4% in 2027.

The BCC sees the positive side of recent trade agreements with the US, EU and India, but warns that major uncertainties remain on the global trade outlook due to “the potential for short-term changes in policy leading to behavioural shifts among importers and exporters to manage the changes”.

Its Head of Research, David Bharier, explained: “Recent trade talks aimed at averting some US tariffs and easing EU trade frictions could support exports and imports this year. However, the scale and timing of any economic gains remain uncertain as negotiations continue.”