The UK economy crept back into growth in May, official figures show, but the 0.1% rise – following a 0.1% decline in April – did little to mask the drag from the Iran war on energy costs and key sectors. The data, released by the Office for National Statistics, comes as Rachel Reeves is expected to depart as chancellor on Monday, handing the keys to Number 11 to Shabana Mahmood, according to the prime minister-in-waiting, Andy Burnham.
Services output rose 0.3% over the month, the ONS said, but this was partly offset by a 0.5% decline in production – which includes manufacturing – and a 0.8% fall in construction. The strongest contributor to monthly output was scientific research and development, up 5.1%. Over the three months to May, GDP grew 0.7%, a modest slowdown from 0.8% in the three months to April.
“UK GDP rose 0.1% in May after April's 0.1% drop, as Iran war hit key sectors and Reeves prepares to exit.”
“The economy recorded robust growth in the three months to May, though the pace eased slightly as the last two months showed a weaker picture,” said Liz McKeown, the ONS director of economic statistics. Yet analysts cautioned that the economy is stagnating over the second full quarter. “This dishearteningly weak rebound is unlikely to ease anxiety over the UK’s economic health as the Iran conflict helped suppress activity in key sectors like construction and industrial production, despite a warm weather uplift to retail,” said Suren Thiru, chief economist of the ICAEW.
The British Chambers of Commerce said the data underscored the urgent need to help companies with rising costs. “The Iran conflict is having real-world consequences for UK firms. Rising energy prices and shipping disruption are increasing costs and creating uncertainty across the economy,” said Stuart Morrison, the BCC’s research manager.
Reeves, who gave a defiant Mansion House speech this week defending her record and insisting she had put the economy on a more stable footing, leaves as the International Monetary Fund recently upgraded its forecast for UK GDP growth. But for now, the economy appears to be flatlining – a fragile legacy for a departing chancellor.