According to the Office for National Statistics (ONS), the UK economy shrank by 0.1% in May, marking its second consecutive monthly contraction. The decline surprised analysts, who had expected modest growth.
Manufacturing was the main driver of the fall, with notable drops in car production and pharmaceuticals – the latter described by the ONS as “often erratic”. Retail sales also performed poorly, while oil and gas extraction fell back.
Despite this, the services sector showed modest growth, helped by a rebound in legal services following recent changes to stamp duty thresholds.
Chancellor Rachel Reeves acknowledged that the figures were “disappointing”, particularly given the Government’s focus on reviving economic growth.
In contrast, the UK economy grew by 0.7% in the first quarter of 2025, buoyed by a rush of exports ahead of new US tariffs and a spike in housing transactions before a stamp duty relief expired.
This earlier growth helped offset some of May’s weakness. As a result, overall GDP for the March-to-May period rose by 0.5% compared with the previous three months.
However, concerns remain. On Tuesday, the Office for Budget Responsibility (OBR) warned that the UK’s public finances were in a “relatively vulnerable position”.
It pointed to rising public debt, worsened by the Government’s recent reversal of planned spending cuts and tax increases. These included changes to welfare spending and the winter fuel allowance, which have added further strain to already stretched fiscal resources.
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