Two-thirds of businesses expect profits to fall as tariffs bite

A snap poll of 562 Institute of Directors members following the President Trump’s tariffs announcement has found that over a third (37%) of business leaders expect to be impacted by the tariffs and of those, over two-thirds (70%) expect their profits to decrease as a result.

In response to the tariffs, 35% of IoD members said they would be reviewing their business strategy, 17% would be reviewing supply chain locations and 13% would be reviewing export markets.

Although 42% of members believed the UK government should maintain good relations with all of its trading partners, 34% would like to see closer alignment with the EU.

Anna Leach, chief economist at the Institute of Directors said ministers’s low key response to Trump’s tariffs had been met with approval among business leaders. She said: “The bulk of business leaders are satisfied with the government’s measured and balanced approach to trade negotiations globally.”

However, she added, closer alignment with the EU was becoming an urgent priority for many businesses: “The EU as a whole is the UK’s largest export market, accounting for £356 billion of exports in 2023, compared with £187 billion going to the United States.”

Business leaders were adopting a “wait and see” approach to the tariffs, said Leach. Others, such as JCB, were looking to re-locate activity to the US. JCB today announced it had doubled the size of a plant being built in Texas so it could expand manufacturing in the US, skirting tariffs.

Leach said that given the current uncertainties around political decisions in the US, businesses were “reluctant to sink time and money into responses which are costly and difficult to reverse”. This would only add to the sluggishness in activity the UK has seen economically in the run-up to and since the October Budget announcements, and would further undermine growth, she added.

There were 562 responses from businesses to the IoD’s poll; of these, 5% ran large businesses (250+ people), 19% medium (50-249), 23% small (10-49 people), 31% micro (2-9 people) and 11% sole trader and self-employed business entities (0-1 people).

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