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Good morning. Today we're talking about the latest UK economic data, Burberry’s troubles and US/China trade tensions.

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Big Stories

Unexpected economic boost

The UK economy grew 0.7% in the first three months of 2025, a significant uptick from the 0.1% growth recorded in the previous quarter and above analyst expectations. This marks the strongest quarterly increase in a year, driven primarily by a strong rebound in the services sector and within the automotive and machinery industries. Chancellor Rachel Reeves highlighted this as a win, noting the UK's faster growth compared to several major economies. Despite this encouraging start to the year, concerns remain about the sustainability of this growth. Analysts note that from April onwards, businesses and consumers faced increased utility and tax bills, coinciding with the onset of US tariffs potentially triggering a global trade war. Recent manufacturing survey data and a fall in payrolled employment suggest a potential slowdown is already underway. The International Monetary Fund has already revised its 2025 UK growth forecast downwards, reflecting these headwinds.

Burberry cuts back

Burberry has announced plans to cut 1,700 jobs, representing nearly 20% of its workforce. This decision comes as the British luxury brand reported a loss of £3m in the last financial year with revenue plummeting to 2014 levels, a 17% annual drop. CEO Joshua Schulman, who took the helm last year, is implementing a "Burberry Forward" strategy to refocus on core heritage products like trench coats and scarves, aiming to reignite brand desire and improve performance. The job cuts will primarily affect head office roles in London and Leeds, as well as the elimination of the night shift at its West Yorkshire factory. This move is part of a broader cost-saving initiative, targeting £100m in savings in two years. Weak global luxury demand and tariff concerns have exacerbated issues stemming from a decade of inconsistent leadership and branding efforts. Three CEOs and three creative designers have cycled through, each bringing their own vision and attempting to "elevate" the brand in different ways. This constant flux has seemingly resulted in a lack of consistent brand identity alienating customers.

US-China trade tensions ease

The US and China have agreed to a 90-day truce involving a significant reduction in their punitive tariffs, prompting a rally in stock markets on both sides of the Pacific. The US will decrease its blanket tariffs on Chinese goods from 145% to 30%, while China will lower its duties on American products from 125% to 10%. China has also pledged to pause some non-tariff trade barriers and ease restrictions on rare earth mineral exports to the US. US Treasury Secretary Scott Bessent expressed a desire to avoid a complete economic decoupling and stated that negotiations will continue to reach a lasting trade agreement. President Trump indicated he would speak with President Xi Jinping, asserting that the 145% tariffs would not return, even if the 90-day period expires without a deal, though duties could increase substantially. The US aims to reduce its trade deficit with China and secure greater market access for American companies, alongside efforts to curb illicit fentanyl exports. Despite this de-escalation, a 30% blanket tariff remains, in addition to existing industry-specific tariffs on cars, steel, and aluminum. Analysts predict the current tariff level will still significantly reduce US-bound Chinese exports. While the tariff reduction is anticipated to ease some inflationary pressures and economic drag, the extent of the impact remains uncertain. Businesses are expected to capitalise on the temporary tariff reduction by accelerating shipments. The 90-day window, though potentially extendable, offers a limited timeframe for achieving a comprehensive and enduring trade resolution.

Elsewhere...

Rating downgrade: The US has lost its last perfect credit rating, as influential ratings firm Moody's expressed concern over the government's ability to pay back its debt.

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