UK firms well-placed to weather global shocks - BoE
By Abigail Townsend
Date: Wednesday 09 Jul 2025
(Sharecast News) - The Bank of England warned on Wednesday that Donald Trump's tariff regime would weigh on global growth, but said UK consumers and businesses were well-placed to weather the storm.
Publishing its latest Financial Stability Report, the central bank's Financial Policy Committee said that since its last report in November, the global economy had been hit by sweeping US levies as well as the duties imposed by others countries in response.
It noted the trade deal reached between the US and the UK, but added: "There remains... considerable unpredictability about the near-term evolution of global trade policies, with negotiations continuing between the US and a number of its trading partners.
"These developments are expected to weigh on world growth, driven both by the direct impact of higher tariff barriers and by the dampening effect of trade policy uncertainty on firms' investment decisions.
"There is a high degree of economic uncertainty around the outlook and there are downside risks to global growth in the near term."
It also warned that these factors were contributing to the uncertainty around the future direction of inflation.
However, the FPC remained more confident about the UK's position.
It said: "In the UK, household and corporate borrowers remain resilient in aggregate. The UK banking system remains in a strong position to support households and businesses, even if economic, financial and business conditions became substantially worse than expected."
In particular, it noted that "despite some pockets of vulnerability, UK corporates would in aggregate be able to service their debts even in the face of further global shocks such as lower global demand and supply".
On Tuesday, the Office for Budget Responsibility said the UK faced "daunting" risks to its public finance because of its mounting government debts.
But speaking to reporters on Wednesday, BoE governor Andrew Bailey said the UK - in common with other advanced economies - was facing "very important structural issues" that would inevitably weigh on public finances. These include an ageing population, climate change and higher defence spending.
Separately, the FPC also said on Wednesday that it would recommend lending rules were relaxed, to enable more mortgages to be issued at high loan-to-income (LTI) levels.
These type of mortgages are more risky for borrowers, as they could struggle to make repayments should interest rates rise or their income fall. But they also allow consumers to buy properties they would not normally be able to afford.
LTIs are currently not allowed to exceed more than 15% of total new mortgages in aggregate, but the FPC said that cap should be lifted.
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