President Donald Trump’s recent imposition of sweeping import tariffs has introduced significant uncertainty into global markets, with ripple effects reaching the UK commercial property sector. These tariffs, including a 10% levy on all UK exports to the US, are poised to influence business decisions and investment strategies across various industries.

Immediate impact on business decisions

The tariffs have led to a notable decline in UK export orders, with April witnessing the fastest slump in British factory export orders in five years. This downturn is attributed to decreased overseas demand for UK goods, as reported by the S&P Global purchasing managers’ index. The manufacturing sector, in particular, is experiencing reduced output and new orders, prompting layoffs and heightened economic uncertainty.

Small and medium-sized enterprises (SMEs) are especially vulnerable. The Federation of Small Businesses warns that the 10% tariffs on UK-US trade could cause “untold damage” to SMEs striving to maintain profitability amid a stagnant domestic economy. This environment of uncertainty is causing businesses to delay or reconsider investment and expansion plans.

Consequences for the UK commercial property market

The hesitation among businesses to commit to new ventures directly affects the commercial property market. Companies postponing expansion or relocation plans lead to decreased demand for commercial spaces, particularly in sectors like manufacturing and logistics.

Financial institutions are also responding to the anticipated economic slowdown. Lloyds Banking Group has increased its provisions for bad loans, citing concerns over the potential impact of the US trade war on the UK economy. Such caution among lenders could tighten credit availability for commercial property investments.

Furthermore, the broader economic implications of the tariffs are prompting the Bank of England to consider interest rate cuts to stimulate growth. However, the effectiveness of such measures may be limited if business confidence remains low due to ongoing trade uncertainties.

Navigating the uncertainty

While the direct impact of the tariffs on the UK commercial property market may be limited, the indirect effects—stemming from reduced business investment and economic growth—pose significant challenges. Stakeholders in the commercial property sector must remain vigilant, closely monitoring economic indicators and adjusting strategies accordingly to navigate this period of uncertainty.