- UK GDP grew 0.1 per cent in May after shrinking 0.1 per cent in April.
- Services kept the economy in positive territory, while manufacturing and construction weakened.
- Economists say the recovery remains fragile as the Iran conflict continues to push up energy costs.
The UK economy returned to growth in May, offering a modest boost after April's contraction. But the latest UK GDP figures also point to an economy still struggling with rising energy costs, weaker industrial activity and growing uncertainty linked to the conflict in the Middle East.
According to the Office for National Statistics (ONS), the economy expanded by 0.1 per cent in May, matching economists' expectations and reversing April's 0.1 per cent decline. While the increase was small, it suggested the economy proved more resilient than many analysts had expected after the Iran conflict drove up oil prices and disrupted global supply chains.
The services sector once again carried the economy, growing 0.3 per cent during the month. Scientific research and development recorded the strongest monthly increase, rising 5.1 per cent, while computer programming and advertising also contributed to growth. The pharmaceutical industry also performed strongly, according to the ONS.
The gains, however, were partly cancelled out by a 0.5 per cent fall in production, including manufacturing, and a 0.8 per cent decline in construction.
Looking beyond monthly fluctuations, the economy expanded 0.7 per cent in the three months to May compared with the previous three-month period. Although still considered solid, this was slightly lower than the 0.8 per cent growth recorded in the three months to April.
Liz McKeown, the ONS's director of economic statistics, reportedly said the economy recorded robust growth over the three-month period, although the pace had eased as the latest two months showed a weaker picture.
The ONS also said businesses across manufacturing, hospitality, travel and entertainment had reported disruptions linked to the conflict in the Middle East, which has increased energy prices and affected business activity.
Growth returns, but uncertainty refuses to leave
While the latest figures avoided another monthly contraction, economists suggested they do little to remove concerns about the UK's broader economic outlook.
Suren Thiru, chief economist at the ICAEW, reportedly said the rebound remained disappointing and reflected the impact of the Iran conflict on sectors such as construction and industrial production, despite warmer weather supporting retail activity.
The British Chambers of Commerce also warned that rising energy prices and shipping disruption were increasing costs for businesses and creating fresh uncertainty across the economy.
Analysts said the second quarter could still deliver little or no overall growth, despite May's improvement. Fergus Jimenez-England, associate economist at the National Institute of Economic and Social Research, reportedly said the figures confirmed that growth remained fragile as higher energy prices continued to weigh on the economy.
Yael Selfin, chief economist at KPMG, reportedly said warmer weather and sporting events could support consumer spending during June and July, but this might not be enough to offset weakness elsewhere. She also warned that rising energy prices and tighter financial conditions could pose further risks to growth.
Paul Dales, chief UK economist at Capital Economics, described the figures as a positive start for incoming Prime Minister Andy Burnham, but cautioned that households would continue to face pressure from higher energy costs, as per report.
The International Monetary Fund recently upgraded its forecast for UK economic growth in 2026 to 1 per cent, up from its earlier estimate of 0.8 per cent. Even so, economists continue to warn that renewed tensions in the Middle East and higher oil prices could make sustaining growth more difficult in the months ahead.
Responding to the figures, a Treasury spokesperson reportedly said the government's economic plan had strengthened the UK's position compared with two years ago, pointing to strong first-quarter growth and forecasts suggesting the UK could remain the fastest-growing European economy in the G7 this year and next. Opposition politicians, however, argued the latest figures showed that stronger and more sustained growth remains elusive.
