Investment Delays Mount as Trump’s Trade Chaos Hits UK Economy

UK businesses are delaying investment decisions due to the uncertainty generated by Donald Trump’s “on-off tariffs,” according to Bank of England Governor Andrew Bailey. This hesitancy contributes to a more uncertain future for UK interest rates, despite an anticipated overall downward trend.
Bailey emphasized that the fragmentation of the world trading system is inherently negative for global growth and activity, directly impacting the UK’s open economy. He expressed regret that a long history of trade agreements leading to lower tariffs has been “blown up,” with serious global economic consequences.
However, a potential silver lining for the Monetary Policy Committee (MPC) is the expected moderation in UK wage growth. Bailey stated that he has no reason to doubt projections of wage settlements reaching 3.7% to 3.8% by the end of the year, which could provide the necessary justification for further rate cuts.