Britain’s biggest businesses were fretting about the consequences of a global trade war even before President Trump’s flip-flopping on tariffs last week.
In the days leading up to Trump’s tariffs announcement, executives’ concerns about geopolitical risks were at the highest level since Russia invaded Ukraine, according to Deloitte, which surveyed FTSE 350 finance chiefs at the end of March. Doubts about the outlook for the US economy, the world’s largest, were also elevated.
Companies, already wary of what Trump might do, had started battening down the hatches ahead of time, slashing costs at a rate never seen outside of a global pandemic, Deloitte said.
“It is unsurprising that chief financial officers (CFOs) reported elevated levels of uncertainty,” Amanda Tickel, head of tax and trade policy at Deloitte UK, said.
“Previous periods of uncertainty over future terms of trade have resulted in a prolonged squeeze on investment. This is still a rapidly evolving environment and businesses will need to be proactive in mitigating the effects of tariffs. However, they will be unlikely to actually reconfigure their global supply chains or production until they see the results of negotiations or responses by other nations.”
While the Deloitte survey captured sentiment just days before Trump’s announcement, concern has only grown, amid rollercoaster markets, in the wake of his new tariff regime. That is despite a 90-day pause over the additional “reciprocal tariffs’ for everyone except China.
Baroness Harman said President Trump was wreaking havoc on the world economy
JACK HILL FOR THE TIMES
Baroness Harman, the former Labour frontbencher, accused the government of having a “restrictive vocabulary” preventing ministers from telling the country that “what Trump is doing is a bad thing”.
Speaking on Sky News’s Electoral Dysfunction podcast, she said: “They need to show that judgment: it’s not OK for somebody in the largest economy in the world to wreak havoc, not only in their own country, but on our country and the rest of the global economy.”
The UK government announced over the weekend that it had suspended import tariffs on 89 products and increased the loan facility for exporters to ease the strain on British businesses after the drastic imposition of US levies.
Tariffs on goods including juices, pasta and gardening supplies will be cut to zero for two years in a move that the UK government estimates will save British businesses at least £17 million a year in total.
Rachel Reeves, the chancellor, also announced a £20 billion increase in government-backed financing capacity on Sunday to help companies contend with the global trade war.
Up to £10 billion of that support will be used specifically for firms “impacted in the short term by the current situation”, according to the Treasury.
Businesses were more concerned about tax rises introduced by Rachel Reeves than tariffs, according to a YouGov survey
ANDY RAIN /EPA
Despite the mayhem caused by Trump’s trade policy, a YouGov survey commissioned by Price Bailey, the accountancy firm, found that British businesses were still more concerned about April’s tax rises, introduced in the October budget, than US tariffs.
It found that reducing inflation, interest rates and the tax burden were the top priorities for business leaders, outpacing international trade or labour market concerns.
In the poll, 38 per cent cited inflation and interest rates as their main concern, followed by 34 per cent pointing to the overall tax burden, and 32 per cent to securing a highly skilled workforce. In contrast, MPs’ two main priorities are ease of international trade and a skilled workforce.
The Deloitte survey found that the vast majority of British companies have adopted a “defensive strategy” amid the uncertain geopolitical and economic backdrop.
Of those polled, 63 per cent said cutting costs was a strong priority for them over the next 12 months. Other than at the beginning of the pandemic, that is the highest reading Deloitte has seen. Reducing borrowings and increasing cashflow are the other main priorities for the coming year.
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