Majority of British workers vulnerable to Trump trade war shocks, warns BoE

Daily Mail​

09-07-2025

Three-fifths of British workers are vulnerable to further economic shocks due to Donald Trump's trade war, according to the Bank of England.
In a hard-hitting report, the central bank said manufacturing and retail sectors were particularly exposed if the situation deteriorates, despite the UK's trade deal with the US.
Firms could be directly impacted by higher taxes on goods shipped to the US and by the indirect effect on consumer demand and difficulties accessing financing.
In its latest Financial Stability Report, the Bank said: 'Further shocks could particularly impact firms in sectors dependent on demand from the US market such as manufacturing.
'These sectors and others such as retail trade are also vulnerable to broader reduction in consumer demand globally as well as often being less able to recover earnings through adjusting prices.
'Staff analysis suggests that firms in sectors likely to be more impacted by the global trade shock – either directly or indirectly – account for around 60 per cent of UK employment.'
The Bank also warned trade tariffs could increase the risk of some businesses falling behind on loans.
Households and businesses nonetheless remain resilient, and the UK banking system is equipped to support them even if conditions significantly worsen, the Bank's Financial Policy Committee (FPC) said.
The FPC said there was a high degree of unpredictability about how global trade will evolve, with US President Donald Trump hiking tariff rates in April but negotiations with other countries over possible trade deals ongoing.
Conflict in the Middle East has also raised the risk of energy prices spiking, particularly if the supply of oil and gas were disrupted, it found.
This could particularly impact businesses that are more reliant on financing linked to global financial markets, which have faced turbulence in recent months.
'The potential for much higher trade tariffs increases the likelihood of corporate default in the most exposed sectors, and losses for their lenders,' the FPC's Financial Stability Report read.
The outlook for the UK is weaker and more uncertain than it was in November, when the committee previously produced a report, it said.
An escalating trade war could weigh on UK businesses should global consumer demand weaken, lending conditions tighten, or reduced availability of funding causes firms to slow down investment.
However, the FPC concluded that despite pockets of vulnerability, UK businesses would typically be able to pay their debts even in the face of further global volatility such as lower demand and supply.
Furthermore, the report found that the UK banking system has the capacity to support households and businesses even if economic and business conditions became substantially worse than expected.
Meanwhile, the committee warned that intensifying geopolitical tensions could raise the risk of cyber attacks around the world.
It said this was a 'global challenge' but that UK financial firms were generally prepared to deal with cyber incidents.