IFS boss: We’re screwed with or without trade deals
The director of the Institute for Fiscal Studies (IFS) has suggested the UK could be heading for a recession as a trade deal may not be enough to revive crumbling markets or prevent a slump in economic growth.
Paul Johnson, who is set to leave the leading economics think tank in the summer, told Times Radio that the scale or market falls around the world resembled events seen during a recession.
President Trump’s sweeping tariffs on goods, ranging between ten per cent and 49 per cent, have driven mass selloffs, with Johnson warning that the instability will leave people “a lot worse off”.
“It’s clearly an indication that people think companies will make a lot less profit and that could mean more in the way of layoffs and redundancies,” he said.
“Unless something happens, we are certainly in for a period of much slower growth than we were expecting, quite possibly a recession as a result of the actions of one man.”
When asked whether a series of deals aimed at mitigating Trump’s tariffs would support the UK economy, Johnson said: “I rather fear we’re screwed either way.”
“If it became clear that there was a road through this to different levels of tariffs, then that may be positive for the markets. But the uncertainty is going to be damaging whatever [the situation],” he added.
Many forecasters are pencilling in lower growth for 2025 and 2026 than previously expected.
KPMG economist Yael Selfin was the latest to slash the UK’s growth outlook to 0.8 per cent for this year, compared to its forecast of 1.7 per cent in January.
Selfin pointed out that 25 per cent tariffs on imports of cars to the US could be especially damaging to UK vehicle manufacturers.
“The UK automotive manufacturing sector is particularly exposed given the complex supply chains of some producers,” she said.
Selfin also warned that the UK’s public finances will also come under considerable strain if growth is as low as some forecasters now expect due to an escalating trade war.
Economists at Peel Hunt downgraded UK growth from 1.3 per cent to 1.1 per cent and described Trump’s tariffs as “economic valandalism”.
The National Institute of Economic and Social Research (NIESR) said before Trump unveiled his tariffs that ten per cent tariffs imposed on UK exports to the US would leave the UK economy stagnant.
Growth outlooks are especially bad for the US economy as a trade war erupts.
Goldman Sachs now believes that there is a 45 per cent risk of a recession while Barclays said data projections on aggregate demand and the labour market was “consistent with a recession”.