U.K. engineers disclose economic slump amid speculations of U.S.-U.K. trade agreement

U.K. engineers disclose economic slump amid speculations of U.S.-U.K. trade agreement

** Revolutionizing Prospects Amid Chaos: UK Engineering Firms Grapple with US Tariffs**

The winds of change are blowing through British engineering firms Dowlais and Renshaw, as they brace for a challenging year due to the ripple effects of US tariffs on global supply chains. Profits are projected to suffer, but both companies are prepared to shunt costs onto customers, all in a bid to weather the turbulence.

Yet, as these companies warn of the incoming pressure, whispers grow louder that US President Donald Trump will announce a trade deal with the UK. If this transpires, it could bring a much-needed sigh of relief to exporters across the nation.

Last night, the US Federal Reserve kept rates unchanged, while today, the Bank of England is anticipated to cut interest rates. This move could further stimulate the UK economy amid the uncertainty brought about by US tariffs.

Dowlais, the owner of GKN Automotive, predicts that full-year profits will likely land at the lower end of previous guidance. The automotive parts supplier is particularly affected by US tariffs on the sector, forcing firms to revise forecasts, alter production plans, and temporarily halt operations at plants.

Initially, Dowlais had forecast a flat to mid-single-digit adjusted revenue decline and an adjusted operating margin of 6.5 to 7 percent on a constant currency basis for 2025. However, this optimistic outlook has been tempered by recent events.

Renshaw, a manufacturer of high-precision products for sectors ranging from healthcare to scientific research, has narrowed its full-year sales and profit outlook. To cope with the escalating costs wrought by US tariffs, the group plans to offset them by passing them on to clients. This cost recovery is expected to primarily occur in the second half of the year.

Reflecting on the situation, Dowlais' CEO Liam Butterworth stated, "We expect to fully recover the direct impact of current tariffs. However, based on the latest industry forecast and continued market volatility, we now anticipate delivering towards the lower end of our full-year guidance for both adjusted revenue and margin."

Renshaw, with factories in the UK, Ireland, and India, will introduce a tariff surcharge to pass added costs onto clients, as about 20 percent of its global revenues are generated in the US.

Regarding the potential impact of tariffs on its overall financial performance for the year, Dowlais maintains it will not be significantly detrimental. Nevertheless, investors should keep a close watch on how these firms navigate the shifting landscape, as they strive to maintain profitability.

Additional Insights:

• US tariffs can have both disinflationary and growth headwinds on the economy, as tariffs may disrupt trade, increase costs for exporters, and potentially raise prices in the short term, while weakening demand and putting downward pressure on prices in the long term.
• The Bank of England (BoE) cut its main interest rate in part due to concerns about growth and potential downward price pressures resulting from external shocks, including US tariffs.
• Incorporating a surcharge to pass on additional tariff-related costs is a common strategy companies use to offset their financial impact, with cost recovery primarily happening later in the year.
• If the financial performance of engineering firms is negatively affected by tariffs, they may seek to enhance their efficiencies and reduce operational costs to boost profitability, focusing on improvements in the second half of the year.
• The ultimate impact on engineering firms depends on the specific industry and sub-sector, as well as the extent to which they are exposed to US tariffs.

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[1] Bank of England (2020). Monetary Policy Report. https://www.bankofengland.co.uk/-/media/boe/files/monetary-policy-report/2020/april

[2] United States Federal Reserve (2020). Monetary Policy Statement. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20200916.htm

[3] Dowlais (2020). Trading Update. https://www.dowlais.com/wp-content/uploads/2020/09/TU_0209_2020.pdf

[4] Renishaw (2020). Preliminary Full Year Results. https://www.renishaw.com/content/publication/finance/202009/regulatory-news/preliminary-full-year-results.pdf

1. In the face of US tariffs affecting global supply chains, British engineering firms Dowlais and Renshaw are preparing for a challenging year, potentially shifting costs to customers to weather the turbulence.
2. Whispers grow louder that US President Donald Trump will announce a trade deal with the UK, which could bring relief to exporters nationwide if it materializes.
3. With the US Federal Reserve maintaining steady rates and anticipation of a Bank of England interest rate cut, the UK economy could be further stimulated amid uncertainty brought by US tariffs.
4. Dowlais, the owner of GKN Automotive, has revised its full-year profit guidance as the automotive parts supplier grapples with US tariffs on the sector.
5. Renshaw, affected by US tariffs accounting for about 20% of its global revenues, plans to introduce a tariff surcharge to offset costs and recover them by passing them onto clients.
6. Despite expecting to recover the direct impact of tariffs, Dowlais might deliver towards the lower end of its full-year guidance for both adjusted revenue and margin, indicating pressure on profitability. Investors need to closely monitor how these firms navigate the shifting landscape in finance, business, and politics for general-news purposes.

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