UK economy shrunk in April as tax rises and US tariffs kicked in

The UK economy shrunk by more than expected in April as taxes rose for firms, household bills increased and exports to the US plunged.

The economy contracted by 0.3%, more than the 0.1% fall predicted by economists.

In April, employers’ National Insurance and water, energy and council tax bills all rose, while the introduction of tariffs by US President Trump led to the largest monthly fall on record in US exports.

The figures come after a day after chancellor Rachel Reeves set out spending plans aimed at boosting growth, with funding increases for the NHS and defence, but budgets squeezed elsewhere.

The UK government has made growing the economy its main priority in an effort to boost living standards.

Monthly growth figures can be volatile and the more stable three-month figure to April showed the economy grew by 0.7%.

Chancellor Rachel Reeves said April was a “challenging month” with businesses facing “a lot of uncertainty” due to the introduction of US tariffs.

“Many businesses were worried about exporting that month,” she told the BBC.

She said the government had since agreed a deal on tariffs with the US and had also made trade agreements with the European Union and India.

US President Donald Trump has imposed tariffs on many countries since returning to the White House in an attempt to encourage businesses and consumers to buy more American-made goods.

The UK and the US have reached a deal over tariffs on some goods traded between the countries, but a 10% import tax still applies to most UK goods entering the US.