British Equities Mixed as Markets Melt Down Trade Deal Uncertainties

The U.S.-U.K. trade deal announced in May 2025 brought a flicker of optimism to British equities, but the broader market remains in a holding pattern. While sectors like automotive and advanced manufacturing surged on tariff reductions, other areas—such as energy and utilities—struggled, leaving investors grappling with a mixed picture of opportunities and risks.

Sector-Specific Winners and Losers

1. Automotive: A Crucial Turnaround
The deal slashed U.S. tariffs on UK-made cars from 27.5% to 10%, a lifeline for firms like Jaguar Land Rover and MINI. The quota of 100,000 vehicles annually covers nearly all UK car exports to the U.S., easing cost pressures.

Renishaw, a precision engineering firm with 20% of revenue tied to U.S. markets, soared 19% in May after beating profit forecasts, highlighting the deal’s ripple effects.

2. Steel and Manufacturing: A New Dawn for Heavy Industry
UK steel producers, including Tata Steel UK, gained tariff-free access to the U.S. market under a 13,000-tonne quota. The FTSE 250 index rose 0.6% as engineering firms like Weir Group (WEIR.L) saw upgrades from analysts.

UBS raised its rating to “buy,” citing the deal’s potential to cut costs and boost exports.

3. Tech and Aerospace: Collaboration Fuels Growth
The agreement’s focus on AI, semiconductors, and 5G/6G collaboration sparked investor interest in UK tech firms. Rolls-Royce gained tariff-free access to U.S. aerospace markets, while semiconductor stocks like Imagination Technologies rose on reduced regulatory hurdles.

4. Laggards: Energy and Utilities Stumble
Not all sectors benefited. Centrica (CNA.L), the UK’s largest energy firm, fell 7.6% amid weak demand from warmer weather and volatile gas markets. The trade deal’s impact on energy equities remains negligible.

Market Sentiment and Broader Context

Index Performance:
The FTSE 100 dipped 0.3% as investors balanced optimism over trade gains with lingering macroeconomic concerns. The Bank of England’s rate cut to 4.25%—the first reduction in over a year—failed to fully offset worries about global trade tensions.

Global Trade Dynamics:
While the U.S.-U.K. deal offers a blueprint for future agreements, unresolved disputes with China (145% U.S. tariffs vs. 125% Chinese retaliation) and the EU’s resistance to the 10% universal tariff cloud the outlook.

Conclusion: A Fragile Rally Ahead

The trade deal has injected short-term momentum into British equities, particularly in export-driven sectors like automotive and advanced manufacturing. Companies such as Renishaw and Weir Group exemplify this, with gains of 19% and 4.1%, respectively, in May 2025. However, the retention of the 10% universal tariff and unresolved trade wars with China and the EU mean risks persist.

Investors should prioritize sector-specific plays in manufacturing and technology while remaining cautious on energy and utilities. The Bank of England’s rate cut signals a shift toward easing monetary policy, which could support equities further if inflation continues to decline.

The deal’s true success will hinge on its ability to catalyze broader agreements and stabilize global trade—a challenge that remains unresolved. For now, British equities are caught between cautious optimism and lingering uncertainty.

Data as of May 2025. Past performance does not guarantee future results.