Economy shrinks by more than expected amid record fall in exports to the US

The economy saw the biggest monthly contraction for a year-and-a-half in April as manufacturing activity pulled back sharply amid a record drop in exports to the US following President Donald Trump’s tariff hikes.

Official figures showed gross domestic product (GDP) fell by 0.3% in April, compared with growth of 0.2% the previous month, and marking the biggest contraction since October 2023.

It was also worse than the 0.1% contraction expected by most economists.

The Office for National Statistics (ONS) said output in Britain’s manufacturing sector dropped by 0.6% in April, having surged earlier in the year as US importers stocked up ahead of Mr Trump’s tariff rises, which came into effect at the start of April.

Exports to America fell at the fastest pace on record, down £2 billion in April – led by machinery and transport, including cars, according to separate trade figures from the ONS on Thursday.

ONS director of economic statistics Liz McKeown said: “After increasing for each of the four preceding months, April saw the largest monthly fall on record in goods exports to the US with decreases seen across most types of goods, following the recent introduction of tariffs.”

The wider economy also shrank as the all-important services sector saw activity fall by by 0.4% in April.

The ONS said this was largely pulled lower by a drop off in demand in the housing market following the rush to complete property deals ahead of the stamp duty change from April 1.

Chancellor Rachel Reeves acknowledged that the latest GDP figures were “clearly disappointing”, but insisted her spending review would help deliver growth.

She said: “Our number one mission is delivering growth to put more money in people’s pockets through our plan for change, and while these numbers are clearly disappointing, I’m determined to deliver on that mission.”

The fall in GDP also comes after soaring wage cost pressures from April, with the increase in national insurance contributions (NICs) and the minimum wage both taking effect at the start of the month, which has hit the service sector particularly hard.

Ms McKeown said declining output in services and manufacturing sectors both dragged on overall GDP in April.

“However, over the last three months as a whole GDP still grew, with signs that some activity may have been brought forward from April to earlier in the year,” she said.

She added: “Both legal and real estate firms fared badly in April, following a sharp increase in house sales in March when buyers rushed to complete purchases ahead of changes to stamp duty.