Contrarian Gold in the UK's Silver Lining: Tech and Finance Lead Amid Tariff Turbulence

The UK private sector's June 2025 PMI data revealed a fragile recovery, with services growth offsetting manufacturing's slump. While the Composite PMI edged up to 50.7—marking two straight months of expansion—the numbers mask a deeper truth: this is a sectoral battle. For contrarian investors, this divergence offers a roadmap to profit from tariffs and fiscal austerity. Let's decode the opportunities and risks.



### The Contrarian's Playbook: Where to Dive In
The services sector's 51.3 PMI reading—a three-month high—hints at a domestic renaissance. Sectors like technology and financial services are the unsung heroes here. Why? They're insulated from U.S. tariffs and benefit from two key trends: cost efficiency and global realignment.

#### 1. Tech: The UK's Quiet Giant
The UK's tech sector is booming, fueled by domestic demand and a post-tariff reshoring boom. With manufacturing exporters (like automotive) reeling from U.S. tariffs, tech firms are filling the void. Consider Graphcore (LSE: IPG) or Darktrace—both leveraging AI and cybersecurity demand. These companies thrive on pricing power and minimal reliance on tariff-hit supply chains.



Action: Buy dips in UK tech stocks with strong R&D pipelines and domestic revenue streams. Avoid firms tied to export-heavy sectors.

#### 2. Financial Services: The New Brexit Winners
The City of London's dominance in fintech and asset management is paying off. Post-Brexit, UK banks like Barclays (LSE: BARC) and HSBC (LSE: HSBA) are streamlining costs, while fintechs like Revolut capitalize on cross-border payment demand. The OECD's 1.3% growth forecast for 2025 hinges on services—this sector's pricing power will keep profits steady.



Action: Look for financials with low exposure to manufacturing clients and high digital adoption. Shorts in banks reliant on trade finance? Avoid.

### The Sectors to Avoid: Tariff Traps and Fiscal Crossfires
Not all boats are rising. Manufacturing's 47.7 PMI—a 12-month low—highlights vulnerability. The OECD warns that U.S. tariffs could shave 0.4% off UK growth annually. Here's where to stay short or steer clear:

#### 1. Automotive & Machinery
U.S. tariffs on cars beyond the 100,000-unit quota are killing export margins. Jaguar Land Rover (part of Tata Motors) is a prime example—its shares have underperformed peers due to tariff costs and supply chain bottlenecks. Shorts here could profit as inventories pile up.

#### 2. Materials & Heavy Industry
Steel and aluminum producers like British Steel face double trouble: U.S. tariffs and domestic energy costs. The OECD's 104% GDP debt forecast by 2026 suggests no fiscal lifelines here. Stay away.

### Timing the Contrarian Move: PMI & OECD Clues
The June PMI's “services up, manufacturing down” split aligns with the OECD's 1.3% growth target—a slow grind, not a crash. This makes June-July 2025 ideal for contrarian bets:

- Buy tech/finance on dips (post-PMI data volatility).
- Short tariff-hit stocks as Q3 earnings disappoint.

### Final Warning: Don't Underestimate Fiscal Drag
The UK's 1.2% fiscal tightening through 2026—via welfare cuts and tax hikes—means no sugar rush from government spending. Focus on firms with domestic revenue and cash reserves, not those betting on stimulus.

### Conclusion: Silver Linings in a Gray Economy
The UK's private sector is a mosaic of winners and losers. Tech and finance are the real contrarians—they're thriving while others falter. By pairing longs in these sectors with shorts in tariff casualties, investors can turn the UK's uneven recovery into profit. As Jim would say: “This isn't a recession—it's a rotation. Follow the sectors, not the headlines!”

Stay contrarian, stay sharp.