Good morning. Today we're talking about UK economic data, US tariff U-turns and a luxury fashion house acquisition.

Big Stories

Economic boost as tariffs loom

The UK economy demonstrated stronger than anticipated growth in February, expanding by 0.5%, according to the Office for National Statistics. This positive figure, driven by a robust performance in the services sector (0.3% growth), comes as the UK braces for the impact of newly implemented US tariffs. Notably, exports of goods from the UK to the US saw a third consecutive monthly increase, reaching their highest level since November 2022, suggesting a potential rush by businesses to pre-empt the tariffs. The construction sector also showed a recovery, indicating a positive impact from government support for housebuilding. While the February growth exceeded analysts' forecasts of 0.1%, concerns remain about its sustainability. The implementation this week of a 10% tariff on a range of UK goods entering the US, a significant trading partner accounting for 17% of Britain's international trade, is expected to exert downward pressure on economic activity. Furthermore this month, UK consumers are facing increased utility bills and council tax, while businesses contend with £25bn of tax rises, potentially dampening future growth prospects despite February's encouraging figures.

Tariff U-turn

The US administration has unexpectedly paused its recently enacted reciprocal tariffs for 90 days, offering a reprieve to countries that did not retaliate. This decision, effective on the same day the tariffs were implemented, excludes China, which had responded with an 84% tariff on American goods and will now face a significantly higher 125% tariff. The White House stated that all other tariffs will be set at the baseline of 10% during this temporary suspension, with reports indicating that Canada and Mexico will maintain their exemption. This sudden shift in policy comes amid growing concerns from analysts, including JPMorganChase CEO Jamie Dimon, who warned of a looming tariff-induced recession. While these fears may not entirely dissipate, the 90-day pause signals a potential willingness by the administration to adjust its signature trade policy. Notably, smartphones, computers, and certain other electronic devices will be exempt from these "reciprocal" tariffs, including the heightened duties on Chinese imports, providing relief to major US technology firms reliant on Chinese manufacturing. This marks the first significant concession in the US's trade actions against China, described by some analysts as a potential "game-changer."

Luxury fashion mega-deal

Italian luxury fashion house Prada has announced its acquisition of Versace from Capri Holdings for $1.38bn, in a move to bolster Italy's fashion industry and increase its competitive standing against French luxury conglomerates. This marks Prada's largest acquisition since its founding in 1913, signalling an ambition for expansion following a period of robust double-digit growth, largely driven by its popular Miu Miu label. Versace, which US-based Capri acquired for $2bn in 2018, is being sold at a loss as Capri shifts focus to its other brands and debt reduction after experiencing weakening sales. Donatella Versace, who recently stepped down as creative director of the ​ brand founded by her late brother Gianni, expressed her honour in seeing her family's legacy entrusted to another Italian family business. The merger positions Prada, Italy's largest fashion group, to better compete in a global luxury market dominated by French entities like LVMH and Kering who have acquired Italian luxury brands including Fendi, Gucci and Bulgari for more than two decades. While LVMH's valuation remains 20 times larger than Prada, this acquisition represents a significant step for Italian fashion in consolidating its influence.

Elsewhere...

Steel changes: The UK government is taking control of Chinese-owned British Steel after emergency legislation was rushed through Parliament in a single day.

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Number of the Day

£50bn

An estimate of how much the new Universal theme park in Bedfordshire will generate for the British economy. It will be the first Universal-branded theme park and resort in Europe and is set to open in 2031.

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