Tariff Fallout Deepens Wounds of the UK Services Sector: First Contraction in 18 Months

The UK services sector contracted in April 2025 for the first time since October 2023, impacted by global concerns stemming from escalating trade tensions and the latest U.S. tariff plans.
According to the Purchasing Managers' Index (PMI) report by S&P Global, the index dropped to 49 points in April, down from 52.5 in March, marking the weakest reading in more than two years and falling below economists’ forecasts of 49.9. As commonly understood, any reading below 50 indicates a contraction in economic activity.

The report highlighted that UK service companies recorded the lowest levels of new orders from abroad since 2020, driven by heightened caution across global markets due to mutual trade threats, negatively impacting investment flows and consumer spending.

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Trade Tariff Tensions Cast a Shadow Over the UK Economy

These pressures are closely linked to the tariffs imposed by former U.S. President Donald Trump, which have disrupted global supply chains and weakened international demand. A similar impact was recently observed in the U.S. wedding industry, which suffered significantly from tariffs on Chinese imports.

S&P Global also noted that the high level of investor caution has slowed job creation, with the pace of new hiring falling to its lowest level in several months.
Nevertheless, the survey showed cautious optimism that easing some monetary policies could help lift business sentiment.

Meanwhile, British business associations have urged the government to take supportive measures to aid the services sector, which accounts for over 70% of the UK economy, as mounting threats continue to cloud growth prospects for 2025.