Uncertainty in the form of concerns over demand, the UK economic backdrop and ongoing geopolitical turmoil in the form of US tariffs continues to dominate member discussions this month, echoing sentiment shared in ICAEW’s Business Confidence Monitor Q1 2025. 

Despite this, members’ resilience shines through as they continue to navigate challenging and changing conditions specific to each sector, including retail members reacting to the recent and well-publicised cyber-security breaches.

“Tariffs present a big challenge to us, particularly as we already sell delivered duty paid to the USA. The USA is a huge opportunity for us, so we want to make it work,” is the sentiment shared by a member working in manufacturing based in Scotland. 

The knock-on effects of US tariffs were raised at a meeting of ICAEW’s Energy and Natural Resources Community Advisory Group.“ Everyone was trying to get copper into the US before tariffs kicked in, but this created a shortage of copper in the UK,” another member explained. 

“Although tariffs have generally had a positive impact on commodity prices (excluding oil) this created an inflationary impact for end users. This has a knock-on effect through supply chains with the increase in copper price having a negative impact on the transition to net zero.” 

The general feeling is that investment decisions remain on hold, with a wait-and-see approach being taken by businesses across multiple sectors. A member working in renewable energy noted: “Investment is down in onshore wind. It’s a really challenging environment globally with concern that President Trump will pull the plug on everything. There is too much uncertainty.”

Indeed, ongoing risks are causing businesses to take their time with “decisions stuck on board agendas with no agreement on the investment required”.

A member in the advertising sector shared: “Macroeconomic trends are tough. With a client base including some large worldwide organisations that are impacted by tariffs, we could see businesses reduce their marketing and advertising budgets.”

In the South West, the volume of container shipping was reported to be “significantly reduced” during the past two months as a direct result of tariffs. 

Economic outlook

On the domestic front, economic announcements made in May provided something of a reprieve and fuelled hope that business conditions will improve. 

The UK GDP figure for the first quarter of the year showed an expansion of 0.7%, beating expectations. Whether this is the start of a positive trend or a blip due to increased activity ahead of the tariff announcements and UK policy changes from April remains to be seen.

One member in the property sector shared some insight: “The increase in Stamp Duty Land Tax saw the property market very busy in March but slow since, with residential sales struggling even with a drop in price and added incentives.”

This month, the Bank of England cut interest rates from 4.5% to 4.25%, but concerns remain over the inflationary effect of businesses raising prices to protect or restore profit margins, not to mention the impact of wage increases. 

A small manufacturing business in the South West reported awarding a pay increase of 3.5%, but with an increased uplift to those who are closest to the National Minimum Wage. Office for National Statistics figures released in the week commencing 19 May saw inflation climb to 3.5%, exceeding expectations and throwing into question the timing and trajectory of future rate decisions.

The new UK-EU trade deal was outlined by representatives from the Department for Business and Trade at breakfast meetings with ICAEW members in the North East and Yorkshire and Humber regions. This reset, hot on the heels of the UK/US trade deal and UK-India Free Trade Agreement, was generally well received: “The opportunity for the UK is that it is more stable than other European countries. The government has pressed the accelerator on what they want to achieve and is putting the tools in place,” one member remarked.

AI, sustainability and scale up

In-person member events at Chartered Accountants’ Hall last week focused on artificial intelligence (AI) assurance and sustainability for business. 

Although the potential for AI to improve efficiency and accelerate business growth is well recognised, concerns around the risks presented have slowed adoption. The AI conference discussed topics including responsible adoption, the role of regulation in driving demand for assurance services and audit considerations where a business has embedded AI into their financial processes. 

At a meeting of members in the East of England the discussion turned to “the use of automation and AI to boost efficiency, adapt workforce strategies in response to rising costs and balancing innovation with short-term resilience”.

The Sustainability for Business event focused on the role of technology and the interconnection of climate and nature issues, and the need to consider both in an integrated way in the context of assessing financial risk, financial statements and adapting business strategy.

Scale-Up Live 2025 will take place on 1 July at Chartered Accountants’ Hall. This in-person event brings together learning from the series for an evening of discussion, inspiration and networking. 

As always, we are extremely grateful to our volunteer network of committees, communities and ICAEW regional teams who provide feedback and gather insights.