As news broke out on Friday, Prime Minister Rachel Reeves was eating breakfast on Downing Street alongside the economists as the UK economy grew by an astounding 0.5% in February, far exceeding analyst expectations.
The GDP bump was relayed to Reeves by WhatsApp aides, urging the Prime Minister to secretly reply with a “heart” emoji. “She was surprised, everyone was surprised,” said one Reeves allied.
For the Prime Minister, it was a welcome rest. Perhaps the rise in her £25 billion employer national insurance “employment tax” in her fall budget kicked this month has had less of a sobering effect many studies suggested.
But Reeves quickly realized that this was a month’s snapshot, and that the office for national statistics data was instantly covering President Donald Trump’s release of the world trade war.
As Reeves said on Friday morning, “The world has changed.” Her job is to ensure that the UK’s economic spring is not wiped out by the ice winds blowing the global trading system.
Reeves’ breakfast was part of a series of meetings this week, explaining economic progress in step by step and examining ways to protect sectors most exposed to tariff disruptions.
Her starting point is that whatever the UK trade deal with the US, Trump’s 10% baseline tariffs that hit the UK along with most other countries – perhaps introduced for the foreseeable future.
The minister hopes he can persuade Trump to cut 25% tariffs on British automobile exports, but Prime Minister Kiel or Prime Minister this week warned that the US president’s trade attack is not in the “passing stage.”
Starmer has committed to “turbocharge” existing government plans rather than moving forward with a set of new policies to address the new environment, and Reeves is trying to speed things up.
Still, some Labour lawmakers believe they have yet to find a policy response to align with their dramatic rhetoric about the “end of globalization.” “It’s all very much about it, but where is the action?”
Reeves’ allies have spoken about four reactions, or “four buckets,” to use the Treasury terminology.
Surprisingly, Reeves is now the second-longest minister of service G7 finance after Italy’s Giancarlo Giorgetti. The IMF and World Bank meetings held in Washington later this month are considered a key moment.
Reeves’ allies argue that she can play a convened role in trade, just as the star played the leading role in shaping the “ambitious coalition” to secure a peace agreement in Ukraine. The initiative inevitably stalled without peace.
The second factor will accelerate public spending reviews and industrial policy decisions to support the economy.
Reeves hopes to make several announcements in the coming weeks ahead of the June 11 deadline, including the settled portion of the spending review (“Ground Zero,” and a multi-year view of all Whitehall spending plans.
The Expense Review focuses on £2 billion additional borrowings for capital expenditures permitted annually under Reeves’ fiscal rules set last October, supporting areas such as transportation infrastructure and energy projects.
“We don’t want to see this money that was used to repair the roof of our school,” said one Reeves alliance. “We want to invest in public sector technology. We have a lot of cash to invest in high-growth areas.”
The third “bucket” is linked to Trump’s tariffs, particularly the support of the sectors most affected by automobiles, life sciences and potentially drugs. This is related to the development of industrial strategies.
Some content could not be loaded. Please check your internet connection or browser settings.
The minister is also obsessed with savings in the steel industry, which has been hit by structural problems before Trump imposes a global tariff of 25% on US steel imports.
An emergency law was introduced on Saturday to try to save the country’s last explosion reactor facility, Scunthorpe’s British Railways plant.
The problem is that it doesn’t measure to the scale of global change that is happening, according to people who are closely working on new industrial strategies.
One person working on a strategy aimed at focusing on eight key growth sectors simply said: “At this point, it’s a total red herring.”
Reeves’ team argues that industrial strategy is not just about money. Regulatory reform and removal of barriers to growth are considered important, but they recognize that they are seen as pursuing “videnomics” without funding.
One allies stated, “Kiel and Rachel see this as a priority. There is definitely a new energy in their industrial strategy.”
Recommended
The fourth part of Reeves’ plan is that, while the “economic agreement” with Trump doesn’t seem too high for now on the White House agenda, the fourth part of Reeves’ plan is to complete the US trade agreement.
Reeves’ attempt to develop close economic ties with Europe, as politically tricky, (the key UK-EU summit will be held on May 19) is based on a proposed agreement to link the UK-EU military capabilities.
Even more sensitive, it appears that Trump wants to not notice. Trade Minister Douglas Alexander was in China this week.
Reeves, accustomed to receiving good economic news on his phone, is now facing a significant few weeks as he tries to cultivate the elements that “green buds” glimpseeded in the growth figures of February.
