CEOs and Board-level directors continue to be tested by the shifting dynamics of both domestic and international trade. Long-established playbooks are looking out of date as new trading partnerships are formed amid a backdrop of immense geopolitical volatility.
Criticaleye spoke to a range of senior business leaders from across its global Community to gauge the economic outlook and what can be expected for the remainder of 2025 and beyond.
This is what they had to say:
Reshaping the Global Trade Agenda
The world seems to be moving from a global system of trade to more bilateral and smaller regional trading partners or blocs. While tariffs will be a key determinant of relative export competitiveness, the other factors include exchange rates and manufacturing capacity. It will be interesting to see how countries manage their respective exchange rates once there is some clarity on tariffs. Any drastic changes could spark another round of negotiations.
China will continue to be the dominant manufacturing economy and meaningfully larger than India. India’s growth rate, from a smaller GDP base, while higher, will not meaningfully change trade dynamics in the region. One has to consider a combination of manufacturing, services, technology — as a separate category — and agriculture when you look at the larger economies…
Climate risk and asset values in climate-sensitive areas will need a close watch. Even if there is a decline in the climate rhetoric, the reality is that carbon emissions have only grown. Disasters will impact the insurance industry and potentially even the mortgage and asset financing sectors. The recent success of the Democratic Mayoral candidate in New York shows that wealth and income inequality and immigration remain issues.
The socio-political impact of widening living standards will likely sway voters in the wealthier economies.
Mary Jo Jacobi, Member of Advisory Board, Rothermere American Institute, University of Oxford and Board Mentor, Criticaleye
US Short-term Growth Holds Steady
I would expect the US to do fairly well, with growth projections averaging in the 1 to 2 percent range over the period. Inflation has cooled considerably from its recent highs, running at less than 3 percent… There are signs of resilience, particularly with respect to the US labour market. I'd say we're in a period of cautious optimism, with many forecasting a strong end to 2025 and beginning of 2026.
President Trump's posture on tariffs has created unease both domestically and internationally, and there are arguments about whether the tariffs are inflationary or not. That bluster has put pressure on US trading partners to come to the table… Vacillations in tariff policy have made businesses more cautious and weakened the dollar, but over the long term the US will remain a safe haven.
The clarity arising from making the 2017 tax cuts permanent removes one big uncertainty dragging on the US economy and the legislation should provide a near-term boost… Higher defence and border security spending will also enhance growth. Cuts in Federal spending aren't due to take effect until after next year's Congressional elections… If history is a lesson, I'm reminded of my former boss, [President] Ronald Reagan's deal with Congress to cut spending along with cutting taxes: the spending cuts never materialised...
External Factors Continue to Impact Business Performance
For the 20 to 30 years before the pandemic, we had a relentless trend of globalisation. This was a period defined by the proliferation of global supply chains and sustained deflationary pressure driven by the offshoring of both labour and capital. It lifted incomes in many developing and emerging market economies and, overall, meant strong global growth with a deflationary impact. Of course, that came with some costs, particularly in advanced economies that saw jobs and industries move offshore.
However, I think what people may not be fully prepared for is that, if we are now entering a more fragmented world, the kinds of disruptions we're seeing — energy price shocks, geopolitical conflict, supply chain breakdowns — are likely to become more frequent and more normal.
One of the clear trends over the past five years is that, across the economy, business performance has been overwhelmingly driven by external factors. It’s become incredibly difficult for businesses to plan or prepare for the kind of global, geopolitical and macroeconomic scenarios we’re now facing — even though these are exactly the forces shaping their bottom line.
So yes, I think the outlook remains incredibly uncertain.
Expect a Comeback in Dealmaking
I do think there's more opportunity now — in a strange, almost counterintuitive way — than there has been for some time. That’s largely because access to debt is improving, which is why you'll see more activity in private equity. That has both positive and negative implications for companies.
On the one hand, there’s an increased risk of being taken out. There’s a strong argument that UK Plc is significantly undervalued, which means we’ll likely see more organisations coming off the public markets because they’re cheap. That makes it very difficult for a CEO — if your company is undervalued, it’s hard to build a strong defensive strategy. Conversely, there’s real opportunity to build new companies because capital is available. You’ll see new businesses emerge, often blending different models or capabilities. I do think we’ll see more top-level dealmaking in the second half of the year.
Interest rates are likely coming down, which means the appetite for risk is increasing. That’s why you’re seeing more optimism at a high level. The real question is how far that optimism trickles down into capital flowing toward disruption. That’s the big unknown, because in these scenarios, capital tends to move quickly into disruptive areas and that, in turn, becomes a threat for some of the larger organisations, as they find themselves under pressure from fast-growing technology businesses.
The Rise of Aerospace and Defence
It’s encouraging to see defence and advanced manufacturing recognised as key growth sectors in the [UK] government’s Industrial Strategy, with aerospace and space rightly highlighted as frontier industries within the Advanced Manufacturing Sector Plan… [W]e’re seeing significant reform efforts that range from changes to the machinery of government to consultations on procurement processes and support for small businesses.
The way in which global events and economic shifts impact our sectors at home should not be understated. There is a lot of good work going on to understand supply chain resilience as part of a broader piece of work on not just readiness, but also economic security that goes beyond the day-to-day activities of businesses and leans into long-term strategies for national security.
... Additionally, the cost of capital and overall access to financial services and products is a key theme we are tackling. There is increasing demand… not just across the defence landscape with an increase in… budgets at home and with our allies, [but] within aerospace, we saw the global backlog of aircraft on order reach over 16,000 for the first time ever in May 2025.
[T]he current production rates and site capacity will require expansions and scale-ups to meet this demand.
Alastair Mills, Managing Director and Head of European Business Services, H.I.G. Capital
Greater Competition in Debt Markets
UK growth has been slightly higher than expected on the upside, with real GDP up 0.7 percent in Q1 25 and services being the key driver [of that], although April’s dip shows the economic environment is not that resilient yet. CPI has eased but the Bank Rate has remained relatively high at 4.25 percent, keeping PE debt financing more expensive.
This is offset by greater competition in the debt markets squeezing margins and increasing liquidity, especially for better assets. Despite the availability of debt, deal volumes remain muted with limited launches in the year to date and a reduced level of completions, which is a function of greater due diligence scrutiny and a market focus on cleaner assets.
Under the current UK government, policy clarity on corporation tax, capital allowance permanence and revised listing rules supports a cautiously optimistic medium-term view. The OBR’s March 2025 base case still shows approximately 1.2 percent real GDP growth for 2025, and businesses remain more confident than a year ago despite fiscal headwinds. Short-term risks — sticky inflation, a stretched public balance sheet and global tariff noise — temper this, and yet mid-market deal volumes will most likely improve over the next six months as pricing stabilises, overdue adviser deal backlogs unwind and rate cuts materialise, increasing returns.
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