London’s Economy: Latest News, Updated February 2025

Welcome to your monthly round-up of the latest news affecting small businesses in London. Each month, we analyse key developments across London’s economy to bring you the stories that matter most to you and your business.

Reviewed and updated by our Accounts and Legal team monthly.

Here’s the key stories impacting London’s economy this month:

Donald Trump’s Trade Tariff Tussle

Headline figures from London’s economy today show that, with the recent election of Donald Trump as President of the United States, the global economy has become fearful of potential tariffs on exports including the United Kingdom. Although at the time of writing (February 24th), President Trump has yet to enact any tariffs on the UK specifically, any future action could have serious repercussions for London.

We say ‘specifically’ because Trump has recently enacted a blanket 25% tariff on all steel and aluminium imports over a specific duty-free limit of 500,000 metric tonnes. According to UK Steel, the UK exported 160,000 metric tonnes of steel to the US in 2023. Even though the UK falls safely within the duty-free limit, UK Steel fears that other, larger nations’ excess steel could be redirected to the UK, devastating UK steel revenues.

The Department of Trade’s latest data shows the US is currently the UK’s biggest trading partner, accounting for 17.2% of total UK trade and exporting £182.6 billion in the four quarters to the end of Q3 2024, with London being responsible for around 35% of this output.

The true impact of blanket tariffs on the UK would be hard to estimate; however, we can see that the Canadian Chamber of Commerce has estimated its economy could shrink by 2.6% if Trump’s 25% blanket tariff were to come into effect.

What does it mean for you?

Unless you’re in the steel business, this currently means nothing. We stress the word ‘currently’ as this could change at any moment.

For those in the business of steel, you too are currently safe, with exports to the UK falling below the threshold. However, there is a real risk that excess steel from larger exporters could be redirected to the UK.

At the moment, UK steel is currently protected from cheap imports by the UK’s steel safeguard measures. However, these safeguards are set to expire in June 2026.

The Gears Slow on the World Economy

Donald Trump’s trade war has already hurt Europe and the wider world, with recessions now threatened in major nations like Germany. The knock-on effect of this has the potential to drop the value of the euro, making London and UK imports more expensive and, therefore, less desirable.

What does it mean for you?

For business trading with the EU, changes like this will most likely strengthen the pound against the weakening Euro. As a result, importing goods from the UK will become more expensive for many EU member states. If your business regularly exports to the EU, we recommend monitoring your pricing closely to stay competitive. It may also be wise to explore non-EU markets as a precaution in case the euro drops significantly.

For London’s economy we foresee a difficulties due to a lack of exports, causing businesses in the area to become highly competitive in the search for partnerships outside the continent.

Heathrow’s Third Runway Plans Take Off

The Chancellor of the Exchequer, Rachel Reeves, has given the go-ahead for a third runway to be built at Heathrow Airport. The new project hopes to create 100,000 new jobs.

The project’s full cost is not yet known, but the Chief Executive of Heathrow Airport, Thomas Woldbye, has said it will be much more than the £14 billion estimated in 2014. Regardless of the final cost, it will be 100% privately funded.

The project completion date is also still an estimate, but experts predict a date around 2050. In the meantime, however, the cost of building this third runway is expected to unlock billions for the UK supply chain.

What does it mean for you?

This project will provide a much-needed boost to the local economy, as businesses in the area will benefit from an influx of highly skilled and well-paid workers.

The new runway will also reduce congestion for those flying in and out of London. For many business owners, this means less time spent on flights and more time running their businesses.

Small Businesses’ Shrinking Confidence

After the announcement of Rachel Reeves’ budget back in October, small business confidence is now at an all-time low (outside of the COVID pandemic), according to the FSB.

The main cause of this shrinking confidence is higher employment costs that will come into effect in April through increases in employer National Insurance contributions.

The reaction to this tax increase is mixed, with 42% of employers intending to increase their prices and 32% planning to reduce their headcount through hiring freezes or redundancies.

Either way, it is worrying to see what knock-on effect this will have on the economy as a whole. With interest rates still high, the Bank of England may have to act quicker than expected to prevent a recession.

What Does This Mean for You?

Rising payroll costs could put pressure on your bottom line, especially for small businesses already navigating tight margins. With both employer contributions and the minimum wage increase, keeping a close eye on your payroll expenses will be more important than ever.

However, this also presents an opportunity to review your operations, refine your workforce strategy, and ensure your business is running as efficiently as possible. Being proactive now could help you stay ahead and avoid tough decisions later.

If you’d like tailored advice on managing your payroll or navigating these changes, our team is here to help. Get in touch today.