Trading tensions

Economic Week In Review | Issue 491 | 4 August 2025

UK construction and property

  • Construction risks | In its summer forecast, the Construction Products Association (CPA) left its forecast unchanged but highlighted that uncertainty was setting in, with fears mounting over the prospect of fresh tax rises in the autumn Budget. Total output is expected to rise by 1.9% in 2025 and 3.7% in 2026. It warned that these sectors all remain vulnerable to near-term delays, including dampened consumer confidence and the risk of investment decisions on infrastructure projects being paused.
  • Project delays | A survey of property developers in the UK by Octane Capital found that one in three UK property developers have been forced to postpone or scale back projects due to funding challenges. 51% percent of developers say they are not confident about launching projects in the next 12 months; a further 34% percent have already scaled back or postponed a development in the past year due to financial barriers. The survey highlighted that interest rates remained the most cited obstacle to securing finance, followed by planning uncertainty or delays and lender appetite.
  • Payments | The Department for Business and Trade announced it will introduce the “strongest legal framework on late payments in the G7.” Under the government’s Small Business Plan, retentions could be banned, and large contractors fined for paying their supply chain late.
  • Infrastructure | Heathrow has submitted its plans for a third runway as part of a £50 billion investment. It says the plans are “shovel-ready” and could create 100,000 jobs, drive growth, and open by 2035.

Global economy

  • US trade | The US trade deficit in goods narrowed to the lowest level in nearly two years in June as imports fell sharply. The goods trade gap narrowed 10.8% to $86 billion last month. In the IMF’s July World Outlook, the US has been predicted to grow by 1.9% in 2025 and 2% in 2026. 
  • Fed rate | The US Federal Reserve held rates steady for the fifth consecutive time. However, for the first time in three decades, two governors voted against the consensus and supported a rate cut this month. The Fed rate will continue to be set in a range between 4.25-4.5%.
  • Global economic growth will be stronger than previously thought, as U.S. imports grew and some of President Donald Trump’s tariff rates have been softened since April. Global growth is forecasted to be 3.0% in 2025 and 3.1% in 2026, according to the IMF’s latest World Economic Outlook, higher than the respective 2.8% and 3.0% forecasts in their previous report. The IMF flagged tariffs and the conflict in the Middle East as the key downside risks. The report also found that growth could be lifted if trade negotiations lead to lower tariffs, ease tensions, and create more certainty and predictability.
  • Tariff update | The agreement reached by the US and EU will see a 15% tariff on goods from the EU to the US; however, it doesn’t lower tariffs on cars, which remain at 25%. The US has also come to an agreement with South Korea, with imports to the US being subjected to a 15% tariff, including cars and semiconductors, Seoul’s main export to the US. President Donald Trump also said he is raising tariffs on Canada to 35%. Goods compliant with the US-Mexico-Canada Agreement would not be subject to that higher rate. A universal tariff of 10% will remain for countries with which the US has a trade surplus. About 40 nations with which the US has a trade deficit face a 15% floor unless a country has negotiated a separate trade deal. Deals with China and Mexico are still pending.

UK economy

  • Shop prices | British shop prices July rose by 0.7% in annual terms – the largest rise since April 2024 – after a 0.4% rise in the 12 months to June, according to the British Retail Consortium. Food prices rose by 4%, speeding up from a 3.7% rise in June, up by the most since February 2024.
  • University students | Under new rules intended to stop universities from being used as a “back door” for migrants claiming asylum, universities will be penalized if fewer than 95% of international students start a course after being accepted onto it, or if fewer than 90% continue to the end. The number of international students in the UK has fallen sharply recently, with significant impacts on university funding.
  • Economic confidence has fallen to its lowest level since the Brexit referendum, according to an index from the Institute of Directors. Tax and the cost of employment are key concerns, as well as the trade war.

Materials currencies and commodities

  • Exchange rates | The euro saw its steepest one-day drop against the dollar since May as Germany and France voiced fears that the EU-US trade agreement would harm the European economy. The single currency was down more than 1% against the dollar. The pound headed towards its largest monthly loss against the dollar since September 2022 last Thursday, reflecting growing confidence among investors in the outlook for the US economy and increasing pessimism over the British one. In July, the pound fell by 3.7% against the dollar; however, it is still up nearly 6% against the dollar this year.
  • Robot bricklayers are set to be trialled on British construction sites amid warnings of a major labour shortage in the house-building industry, with experts warning that at least 25,000 more are needed to meet the Government’s house-building plans. The machine uses two mechanical arms that dispense mortar and lay bricks at a similar pace to humans, equivalent to roughly 500 bricks per robot in a typical eight-hour shift.
  • Copper: The Trump administration announced plans to impose a 50% tariff on copper pipes and wiring (semi-finished copper products) and copper-intensive derivative products, falling short of the sweeping restrictions expected by the market. Copper input materials such as ores, concentrates, cathodes, and copper scraps are not subject to the tariff.
  • Steel tariffs | The EU has removed tariffs on key UK steel product which started on Friday 1st August, under a country specific quota system. The UK can now export up to 27,000 tons of steel per quarter to the EU tariff free.

Environment

  • Solar | As of June 2025, solar became the EU’s largest source of electrical energy for the first time, generating 22.1% of power, an increase of 22% from June 2024. At least 13 European countries set solar records, driven by increased installations and sunny weather.
  • “Climate factor” | The European Central Bank announced that it will apply a ‘climate factor’ to assets submitted as collateral by banks looking to borrow from the Eurosystem. The climate factor could reduce the value assigned to eligible assets pledged as collateral, which the ECB said “acts as a buffer against the possible financial impact of uncertainties related to climate change.”

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 9,068.58 -0.57 10.93
FTSE 250 21,699.34 -1.89 4.19
Nikkei 40,799.60 -1.58 13.62
CSI 300 4,054.93 -1.75 19.81
S&P 500 6,238.01 -1.59 16.67
Nasdaq 20,650.13 -2.17 23.09
CAC 40 7,546.16 -3.68 4.06
Dax 23,729.49 -2.02 34.36
$ per £ 1.3262 -1.23 3.62
€ per £ 1.1477 0.25 -2.13
Gold £/oz 2,532.93 1.99 32.76
Brent Oil $/barrel 69.67 2.97 -9.30

Weekly Summary

This week’s tariff announcements show that the global trade environment is still uncertain. While few construction materials are exported from the UK and the majority of products are sourced domestically or from the EU, the impact on confidence could continue, especially given the ongoing focus on steel. However, recent announcements, such as the infrastructure pipeline and visibility over the progress of projects, could provide the confidence that the sector needs to continue to invest.

The UK agreed to new tariffs with the US in May (which came into effect in June), but due to the global nature of supply chains—particularly at the component level—we will continue to track the developments to understand how they could impact us.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst
Kishan Patel
Kishan Patel,
Research Analyst

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