The UK economy returned to growth in May, but analysts described the 0.1% expansion as a dishearteningly weak rebound after the impact of the Iran war suppressed activity in construction and manufacturing. Figures from the Office for National Statistics showed gross domestic product rose 0.1% in line with economists’ forecasts, following a 0.1% decline in April.
The data is likely to be the last set of official figures issued under chancellor Rachel Reeves, who is expected to depart on Monday when prime minister-in-waiting Andy Burnham selects a new cabinet. Reeves, tipped to be replaced by Shabana Mahmood, gave a defiant Mansion House speech this week defending her record and insisting she had put the economy on a more stable footing.
“UK GDP rose 0.1% in May, after a 0.1% fall in April, amid Iran war impact on energy and supply chains.”
Services output rose 0.3% over the month, partly offset by a 0.5% decline in production and a 0.8% fall in construction. The strongest contributor to monthly output was scientific research and development, which jumped 5.1%. But the underlying picture remained fragile. Over the three months to May, GDP growth was 0.7%, a modest slowdown from 0.8% in the three months to April.
“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.
Suren Thiru, chief economist of the ICAEW, described the monthly data as a “dishearteningly weak rebound” that 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.”
The British Chambers of Commerce called for urgent help for companies facing 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 the BCC’s research manager, Stuart Morrison.
Despite the headwinds, the International Monetary Fund recently upgraded its forecast for UK GDP growth. Whether that optimism survives the change in leadership at the Treasury remains to be seen.