The UK is at risk of a Greek-style debt crisis as US President Donald Trump’s escalating trade war shakes the global economy, investors have warned. The nation’s £2.7 trillion debt, which now surpasses the size of its economy, coupled with a fragile financial position, could leave Britain vulnerable to a “negative spiral” reminiscent of Greece’s debt crisis a decade ago, one of the world’s largest investment firms claimed.

Neil Robson, head of global equities at Columbia Threadneedle, said Britain’s current economic situation is reminiscent of the lead-up to the 2009 eurozone crisis, when investors realised Greece could not balance its books and bond markets turned on it. He explained: “If you think about the problem of being very indebted, you can be as indebted as you like as long as your nominal growth is higher than your interest rate. But if your nominal GDP growth stalls below your interest costs, then you’re in a real negative spiral, and it can move really quickly. We saw that with Greece during the great financial crisis.”

The warning comes after Mr Trump’s “Liberation Day” tariffs wiped £3.8 trillion ($5 trillion) off global stock markets, sparking a global recession threat. The move has slashed growth forecasts worldwide, leaving the UK particularly exposed.

The Chancellor had hoped economic growth would offset Britain’s rising debt, but Mr Trump's tariffs have derailed those plans. The president imposed a flat 10% tariff on all nations, with rates rising to 50% for the most affected.

Though the UK initially avoided the higher tariffs, its integration in the global economy means it is still vulnerable to reduced growth, potentially sparking a crisis for UK debt, known as gilts

These are crucial to global investment markets, and any loss of investor confidence could cause a catastrophic sell-off.

Bruno Schneller, managing partner at Erlen Capital Management, feared the global stagflation shock triggered by Mr Trump’s trade war could have devastating effects on UK debt markets.

He told The Telegraph: “Slower growth, higher inflation, and a jittery investor base could combine to push UK borrowing costs higher at the worst possible time.”

The tariff fallout has sent global markets into turmoil, prompting JP Morgan to raise the risk of global recession from 40% to 60%.

While UK gilts have benefited in the short-term, investors fear this won’t last as the full economic impact of the tariffs unfolds.

Harald Berlinicke, partner at Sarnia Asset Management, said: “If Trump doesn’t course-correct, this crisis will affect many different areas in global markets."

Further adding to the strain, Chancellor Rachel Reeves has had to cut welfare benefits to secure £9.9 billion in fiscal headroom at the Spring Statement, leaving minimal room for manoeuvre should the global economy worsen.

The Office for Budget Responsibility (OBR) has warned that a full-blown trade war could wipe out the remaining margin for error in the Government’s fiscal strategy, potentially forcing further tax increases.

Mr Trump has insisted his tariffs are “going very well” despite the market bloodbath. However, Mr Robson echoed growing concerns, stating that recession risks have risen significantly and it’s “difficult to see what the solution is unless America walks back on this”.