UK economy shrank unexpectedly in May

2 hours ago 6

Tom Espiner

BBC business reporter

Getty Images Two engineers wearing white hard hats looking at a piece of machineryGetty Images

The UK economy shrank unexpectedly in May, contracting for the second month in a row.

The economy contracted by 0.1%, the Office for National Statistics (ONS) said, confounding analysts who expected to see slight growth.

The government has made boosting economic growth a key priority and Chancellor Rachel Reeves said the latest figure was "disappointing".

The fall in economic output was mainly driven by a drop in manufacturing, the ONS said, while retail sales were "very weak".

Oil and gas extraction was down, while car-making and the "often erratic" pharmaceutical industry were weaker, the ONS said.

The services sector grew overall in May, with legal firms recovering from the impact of changes to stamp duty thresholds the previous month.

Ben Jones, lead economist at the CBI business group, said the weak figure for May "highlights the ongoing pressures facing the UK economy, with manufacturing and retail struggling, alongside a patchy performance across other parts of the services sector".

 May 2023 (-0.4%), Jun 2023 (0.7%), Jul 2023 (-0.4%), Aug 2023 (0.0%), Sep 2023 (0.0%), Oct 2023 (-0.4%), Nov 2023 (0.3%), Dec 2023 (0.0%), Jan 2024 (0.5%), Feb 2024 (0.2%), Mar 2024 (0.6%), Apr 2024 (-0.1%), May 2024 (0.3%), Jun 2024 (-0.1%), Jul 2024 (-0.1%), Aug 2024 (0.2%), Sep 2024 (-0.1%), Oct 2024 (-0.2%), Nov 2024 (0.1%), Dec 2024 (0.4%), Jan 2025 (0.0%), Feb 2025 (0.5%), Mar 2025 (0.4%), Apr 2025 (-0.3%),May 2025 (-0.1%)”

Reacting to the figures, Reeves said "while today's figures are disappointing, I am determined to kickstart economic growth".

In the first three months of the year, the economy had grown by 0.7%. During this period it had been boosted by exports as manufacturers raced to beat higher US import taxes, and as homebuyers rushed to complete purchases before the expiry of the stamp duty tax break.

Despite the contraction in May, the economy grew 0.5% in the March-to-May period, the ONS said.

The economy shrinking in April and May shows the outlook for growth "remains fragile", said Hailey Low, associate economist National Institute of Economic and Social Research.

A government U-turn on welfare cuts has eroded the financial buffer it has to cope with economic shocks, she added.

With businesses scaling back hiring intentions after wage and tax rises, and "strained" public finances, prospects for growth "remain muted in the medium term" Ms Low said.

Reeves faces "hard trade-offs" in her Budget in the autumn, "having to raise taxes or cut spending to meet her self imposed rules", she added.

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