PwC UK comments on the US-UK trade deal

As the US administration and UK government announce a new trade deal, PwC UK's experts are closely analysing the potential impacts on UK markets and businesses across a range of sectors.

Market comment

Carl Sizer, Chief Markets Officer at PwC UK, said:

“The UK is on a roll, with two trade deals in quick succession. While much will depend on the fine print, the deal marks a step forward for the UK’s trade ambitions and, alongside today’s interest rate cut, should inject some much-needed confidence into the economy. Tariffs will continue to cause headaches for some businesses, but the agreement should reinforce the UK’s position as a safe and stable trading partner at a time of considerable geopolitical uncertainty. With some of the world’s most high-profile leaders talking up Britain, these agreements are powerful signals for investors that the UK believes in the social and economic value of global trade.” 

Automotive Industry

Cara Haffey, Leader of Industry for Industrials and Services at PwC UK, said:  

“Today’s announcement confirms that UK cars exported to the US will see tariffs reduced from 27.5% to 10%. For UK carmakers and OEMs, this news, alongside the Bank of England reducing interest rates to 4.25%, offers some increased stability and will facilitate more accurate long-term forecasting and planning.  

 “While it is still relatively early to measure the impact over time, these are likely to vary by market segment. Compounding these challenges is the fact that vehicles are discretionary, high-value purchases, and most of the UK-made cars exported to the US are premium and high-end brands. However, softer economic conditions supported by lower interest rates could potentially spur consumer demand.    

Dom Tribe, PwC UK Automotive Sector Leader, adds:  

 “In contrast, mass-market vehicle makers, for whom pricing is a more sensitive lever, could see sharper declines in competitiveness and volumes in the US market, especially if tariffs are decidedly passed on to drivers - which could lead consumers to keep their cars longer or buy second-hand, impacting customer loyalty and profitability for OEMs.   

 “There is still an inflection point on a case-by-case basis as to how much automotive companies can or will be willing to flow price increases through to consumers. If tariff rates are deemed low enough, it may mean that OEMs will not look to make drastic changes to their manufacturing footprint and supply chain networks but look at other cost avoidance or reduction measures which might be able to offset some, or all, of the price uplift.”

Insurance Industry

Alex Bertolotti, Insurance leader at PwC UK says:  

On the US - UK trade agreement:

“Today’s trade deal will be welcomed by UK insurers. While they were not expecting a direct impact, insurance companies will welcome the reduced secondary impact on their supply chains which should reduce costs which they can pass on to customers through reduced premiums.”  

“One of the most significant impacts is the reduction in uncertainty and increase in economic stability that a signed deal gives for UK insurers.” 

“Insurers will be looking at today’s double whammy announcement of a trade agreement and falling interest rates closely. This should reduce credit spreads on UK life insurers which should bring more certainty to life insurers – and the regulator will be looking for companies to be as clear and transparent as possible with customers about what the impact will be.” 

On the reduction of interest rates to 4.25%: 

“Over the years, higher interest rates have provided insurers with stable investment returns and a welcome return to profitable investment income. As interest rates gradually fall, insurers may look to adjust their pricing strategies".  

“Even if there is a knock-on impact on insurance premiums, there will likely be variances in approach as some insurers may choose not to increase premiums to maintain or grow their market share. This underscores the importance of consumers shopping around for the best deal – both on price but also looking carefully at what the insurance product covers. It is always important to fully understand what you are buying and what exactly you are getting for your insurance premium.”