Chancellor Rachel Reeves will arrive in Washington for talks on the global economy as the UK’s growth forecast for this year has been downgraded from 1.6% to just 1.1% by the International Monetary Fund (IMF).

Uncertainty caused by trade tariffs hangs over the meetings involving policymakers, the IMF and the World Bank.

The downgrade in the outlook for the UK is nevertheless ahead of predictions for France, Italy and Germany.

Ahead of her visit, Ms Reeves said: “This forecast shows that the UK is still the fastest growing European G7 country,” she said. “The IMF have recognised that this government is delivering reform which will drive up long-term growth in the UK, through our Plan for Change. 

“The report also clearly shows that the world has changed, which is why I will be in Washington this week defending British interests and making the case for free and fair trade.” 

William Bain, head of trade policy at the British Chambers of Commerce, said:  “The downgrades for both the UK and global economy should come as no surprise to anyone. Businesses are under no illusion that this year will be tough, and sustained growth is likely to be elusive.  

“Firms were already facing into a wall of higher domestic costs, including the national insurance rise, before the US unleashed its explosive tariff proposals. 

“But there is strong support for the Government’s approach to continue negotiation and not immediately retaliate. The US has been open to talks and the signals that a deal can be reached are promising. 

“Firms also don’t want to have all their eggs in one basket and are keen to see closer trading relationships with the EU and the Indo-Pacific region.”

Danni Hewson, head of financial analysis at investment platform AJ Bell, said: “After yesterday’s Wall Street rout, US markets have regained a decent amount of ground despite ongoing concerns about whether Donald Trump might ultimately find a way to fire the Fed chair.”

Amidst the uncertainty investors are piling into gold which pushed the spot price above $3,500 an ounce before giving up most of its gains in early afternoon trading.

London stocks had a pretty mixed day, while sterling hit a seven-month high against the dollar before slipping back in afternoon trading.

The FTSE 100 closed 52.94 points (0.64%) higher at 8,328.6 for the seventh consecutive day, notching its best run of gains in two years.

On Wall Street, stocks rebounded, erasing Monday’s losses after it emerged US Treasury Secretary Scott Bessent told some investors a tariff standoff with China was likely to de-escalate.

Tesla slumps, but investors returning

Tesla‘s first-quarter results missed Wall Street’s profit expectations as the electric vehicle company’s sales fell amid a backlash to Elon Musk’s political activities.

Adjusted net ­income fell 39% to $934 million, missing analysts’ consensus estimates of $1.4 billion. Revenue fell by 9.2% to $19.3bn, below forecasts of $21.3bn. Tesla said it was unable to provide guidance for volumes for this year and would revist its 2025 guidance at its second-quarter earnings.

In a call with analysts after the results, Musk said he would begin scaling back his government role from next month and would increase his work at the company. He insisted the company would return to growth this year after its annual deliveries fell for the first time in 2024. 

Its shares have fallen 37% so far this year. However, Dan Coatsworth, investment analyst at AJ Bell, noted that three times as many of its DIY investors bought Tesla shares than sold them over the past month.

“Certain investors might take the view that Tesla’s significant share price decline has gone too far and they’re buying on the dip, hoping for a bounce-back,” he said.

“While Tesla’s shares are down approximately 50% since mid-December 2024, they are still ahead by nearly 400% over the past five years.”