The UK economy is faltering — the government must act now
A Sharp Wake-Up Call
After a promising start to the year, the UK economy has hit a troubling bump. April saw a sharper-than-expected contraction in GDP, with the economy shrinking by 0.3%. This downturn follows the previous month where growth was better than expected due in part to what many were suggesting was front-loaded growth where businesses may have rushed activity forward to avoid anticipated Tariffs caused by President Trumps’ so called Liberation Day.
Mounting Pressures at Home and Abroad
Several factors are weighing heavily on the economy:
- New US tariffs have disrupted trade and shaken business confidence.
- Rising employment costs, including a higher National Living Wage and increased National Insurance contributions, are straining employers.
- Stamp duty changes have stalled the property and legal sectors, freezing activity in key parts of the economy.
These aren’t just temporary setbacks. Economists warn that these pressures could signal deeper, more persistent issues.
The Cost of Inaction
A shrinking economy doesn’t just affect businesses—it undermines the government’s ability to fund public services. As tax revenues fall, so too does the capacity to deliver on spending promises made during the election campaign.
While some economists have warned that the monthly figures could be a sign of more trouble ahead, the Confederation of British Industry (CBI) has also raised the alarm, urging the government to act swiftly and decisively.
From Rhetoric to Results
After positive words about growth before the General Election, the new government almost immediately laid out policies that had a cooling effect. Now it must deliver real, measurable growth. That means:
- Supporting investment in key sectors
- Boosting productivity through innovation and skills development
- Creating a stable regulatory environment that encourages long-term planning
The UK has the potential to thrive—but only if the right conditions are in place.
A Call to Action
The economy cannot afford to drift. With global competition intensifying and domestic challenges mounting, the government must move to a growth approach. Growth is not a luxury—it’s a necessity. The country needs leadership, vision, and above all, results.
Not all Bad News
Despite the fall of GDP by 0.3% for the month in April, the quarterly rate remained steady and positive at 0.7%. In addition, AIM All-Share which was down heavily at the start of April (along with other stock markets), is now up YTD as is the FTSE 100, S&P 500 and the NASDAQ. This positive environment has contributed to Fundamental’s AIM IHT Growth Portfolio being up more than 11% over the past month.
More information
Fundamental Asset Management have been investing since 2004 by creating bespoke direct equity portfolios in both AIM and main markets. If you or your adviser would like to know more, please email [email protected] or call 01923 713 890.
