Latest economic report shows UK GDP fell by 0.1% in May, following 0.3% fall in April.
Chancellor Rachel Reeves has described the latest GDP figures as “disappointing”.
Following this morning’s news that the UK economy contracted by 0.1% in May, Reeves points to the government’s efforts to support households financially:
“Getting more money in people’s pockets is my number one mission. While today’s figures are disappointing, I am determined to kickstart economic growth and deliver on that promise.
“The choices we have made in our first year in government have seen us extend the £3 bus fare cap, fund Free School Meals for over half a million more children, press ahead with plans to deliver free breakfast clubs for every child in the country and increase the National Minimum and National Living Wage, giving a pay rise to 3 million workers.
“Flatlining growth in 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.
“Today’s data suggests that a sluggish recovery remains the likeliest path in the near-term amid persistent trade uncertainty, a loosening labour market and slowing growth in real incomes. And with business costs rising, many firms are maintaining a cautious approach to investment.
“Today’s data confirms that the growth recorded over Q1 2025 was a one-off occurrence, owing to economic activity pulled forward ahead of the US’s “Liberation Day” tariff deadline. Although the UK has struck a trade deal with the US, much of the detail is yet to be sorted out. Meanwhile, the delayed deadline for other countries has only prolonged uncertainties that have impacted UK growth.
“April’s GDP reversal provided clear evidence that there has not been a sustained improvement in economic activity, reinforced by yet another downbeat month which leaves the economy on track for a shallow contraction once June’s data sees the end of Q2.
Today’s growth figure of -0.1 per cent in May following April’s contraction indicates that the UK’s economic outlook remains fragile. Failure to implement the planned spending cuts has further eroded the UK’s fiscal space and it’s ability to respond to future shocks. Combined with depressed hiring intentions and strained public finances, growth prospects remain muted in the medium term.
With fiscal space increasingly constrained, the Chancellor faces hard trade-offs this autumn budget, having to raise taxes or cut spending to meet her self imposed rules.”
If GDP were flat in June, then the 0.7% q/q gain in Q1 would be followed by a 0.1% q/q rise in Q2 as a whole (BoE forecast +0.25%). The underlying pace of growth is somewhere in between.
We think GDP will rise by a fairly subdued 1.0% this year due to the lingering drags from a weakening global economy and the rises in domestic taxes for UK businesses.
