The UK economy edged back into growth in May, expanding by 0.1% after a contraction the previous month, according to official data that offered a cautious welcome for the new prime minister but underscored the fragility of the recovery.
The figures from the Office for National Statistics (ONS) showed the services sector drove the upturn, boosted by warmer weather and consumer spending linked to the World Cup. However, growth was partially offset by falls in production and construction, leaving the overall expansion wafer-thin.
“UK economy grew 0.1% in May after April contraction, but energy price rises threaten outlook.”
The May rebound followed a slight contraction in April, which the ONS attributed to the early impact of the US-Israel war with Iran on businesses. Since hostilities resumed last week, oil prices have jumped from about $72 a barrel to $84, though they remain well below the $120 peak earlier this year.
“The economy recorded robust growth in the three months to May, though the pace eased slightly as the latest two months showed a weaker picture,” said Liz McKeown, director of economic statistics at the ONS. Over that three-month period, growth stood at 0.7% compared with the previous quarter.
Yael Selfin, chief economist at KPMG, said the warm May weather helped lift consumer spending, a trend likely to have continued into June and July thanks to the World Cup. But she warned that this boost to services “may not be enough to offset weakness across other parts of the economy”. The recent rise in energy prices, driven by heightened tensions in the Middle East, “could pose a risk to the growth outlook, with financial conditions also tightening as a result,” she added.
The modest expansion comes as Andy Burnham prepares to take office as prime minister. Paul Dales, chief UK economist at Capital Economics, called the growth figure “not a bad welcome gift” for Burnham, but cautioned: “With higher energy prices still restraining real incomes, he shouldn’t get used to it.”
A Treasury spokesperson struck a more optimistic note, saying: “We have the right economic plan which has put the UK in a much stronger position than two years ago with the fastest growth in the G7 in the first quarter and the OECD agreeing that we have restored stability.”
Whether that stability can be maintained will depend heavily on the trajectory of the Middle East conflict—and on whether the fragile spring growth can survive the summer’s geopolitical storms.