As investors focused on UK growth companies and startups, we’re closely monitoring the US tariffs and their implications.
While the UK has been less affected than many other economies these changes present important considerations for our portfolio.
UK businesses with direct US-market exposure face immediate challenges. Higher costs and reduced margins could slow US expansion for startups and scaleups. As companies pass some of these additional costs on to customers, softening demand creates additional hurdles for UK exporters.
Fortunately, services – including software – remain outside the tariff scope. This shields many of our portfolio companies, particularly in technology and professional services, allowing them to maintain competitive pricing and continue US growth without duty increases – for now.
Certain sectors face steeper tariffs. In the automotive industry, only the first 100,000 vehicles exported annually from the UK to the U.S. are subject to a 10% tariff. Exports beyond this threshold face a higher 27.5% tariff affecting both vehicles and parts, while discussions continue about extending similar measures to pharmaceuticals. Though not our core focus, these sectors matter for portfolio companies selling into advanced manufacturing and pharma.
The indirect effects warrant attention. While a 10% tariff may seem manageable, the economic ripple effects are complex. US demand may weaken as confidence reacts to price changes, and businesses may reduce spending. Even service companies could feel secondary impacts if their customers face cost pressures.
Case study 1: Wetsuit Outlet and Buster + Punch
Our Venture Partner, Bob Henry, highlights the strain tariffs have placed on UK firms selling Chinese-made goods to the US. Wetsuit Outlet faces challenges due to the extra handling costs involved in sending individual parcels containing Chinese-made products from the UK. They’re also competing with US resellers who pre-stocked Chinese goods stateside, avoiding immediate tariff costs. Once these advantages phase out, a level playing field is expected – but if the UK faces tariffs, US resellers may gain a long-term edge.
For branded manufacturers like Buster + Punch, a design-led luxury home accessory producer, the solution lies in leveraging their differentiation. Consumers willing to pay a premium for distinctive products help offset rising costs, while pricing adjustments and production efficiency improvements ensure competitiveness.
Strategic tip: To reduce tariff pressure, brands importing into the US should ensure that the import price is as low as possible, for example by minimising any management charge added to the cost price. While not a complete solution, this tactic can enhance overall resilience.
Case study 2: MPB’s regional model
MPB, a second-hand photo and video equipment platform, has built resilience into its operating model, as board member and Venture Partner Matt Mead explains. By establishing warehouses and refurbishment centres in the UK, US, and Germany, MPB created independent regional supply chains.
This strategy reduced exposure to cross-border taxes and tariffs, providing a defensive moat against geopolitical uncertainties.
Broader implications and looking forward
Economists warn these tariffs will likely fuel inflation. In the US, this could trigger tighter monetary policy, increasing borrowing costs and potentially causing a recession – with serious global consequences, including for the UK.
Adding complexity is the Trump administration’s openness to bilateral trade agreements with selected countries. While this might eventually benefit the UK, it creates significant unpredictability. Until there’s clarity on potential exemptions, businesses operate in limbo.
Importantly, President Trump announced a 90-day delay in implementing reciprocal tariffs on certain countries, including the UK. While this pause temporarily eases pressure, it does little to resolve the underlying uncertainty. It offers a narrow window for UK businesses to reassess exposure, adjust pricing strategies, and prepare contingency plans – but does not remove the longer-term risk. As with previous delays, this may simply defer the inevitable, adding to the ambiguity facing exporters and investors alike.
This uncertainty is delaying investments and strategic decisions across markets with strong US trade links. Even businesses not directly affected by tariffs are likely to feel the knock-on effects of slower global trade. Higher costs, reduced international demand, and shifting supply chains are creating an environment fraught with uncertainty.
We believe that building resilient, region-specific networks and proactively addressing pricing strategies can offer businesses a lifeline. For UK growth companies, success will depend on adaptability and measured decision-making in this complex environment.
As investors, we’re providing flexibility and support to help portfolio companies navigate these conditions. We’re working with our portfolio founders, boards and management teams to prepare for market challenges without unnecessarily constraining growth.
Our evergreen fund structure gives us a distinct advantage – we’re not bound by fixed timelines and can wait for favourable exit conditions to maximise value. With dry powder available to support high-quality portfolio companies facing temporary funding pressures, we’re well-positioned to weather this uncertainty and capitalise on opportunities as markets stabilise.
While volatility brings challenges, it also creates compelling investment opportunities for patient capital focused on fundamentals. As valuations adjust and competition decreases, disciplined investors can secure attractive entry points into quality companies. History shows that resilient, successful businesses often emerge during uncertain times, built on capital efficiency and sustainable economics. We remain alert to these opportunities, positioned to make selective investments where strong fundamentals align with long-term value creation.
At Gresham House Ventures, we continue to work closely with our investee companies to identify risks and adapt strategies. If your business is navigating similar challenges, we’d love to hear from you. By sharing insights and best practices, we can collectively respond to these global shifts with confidence and agility.
All information correct as at 8 May 2025.
