Britain’s economy unexpectedly contracted for a second consecutive month in May, dealing an early setback to Prime Minister Keir Starmer’s Labour government as it attempts to spur growth.
Gross domestic product (GDP) fell by 0.1% in May, following a sharper 0.3% decline in April, according to data released Friday by the Office for National Statistics (ONS). Economists had forecast a modest 0.1% increase.
The surprise contraction adds pressure on the new government, which is already grappling with external challenges such as U.S. tariffs and persistent inflation. Labour’s economic agenda relies heavily on growth to fund its public spending plans, particularly after reversing controversial welfare cuts and reinstating winter fuel payments for millions of pensioners.
Finance Minister Rachel Reeves acknowledged the setback, calling the data “disappointing” and stressing that there is “more to do” to get the economy back on track.
In response, Labour has launched a multi-billion-pound investment initiative focused on revitalizing the struggling National Health Service (NHS) and repairing critical infrastructure. The government has also pledged to reduce regulatory red tape in an effort to attract investment and stimulate activity.
Separate ONS figures showed a £0.3 billion ($0.4 billion) rise in UK exports to the United States in May, following a sharp decline in April after new tariffs imposed by President Donald Trump came into effect.
Despite the uptick in trade with the U.S., analysts remain cautious. “Growth is becoming incredibly difficult to achieve for the government,” said Lindsay James, investment strategist at Quilter.
“The plans put in place so far are unlikely to move the needle in the absence of improving business and consumer sentiment amid ongoing cost pressures.”
ONS Director of Economic Statistics Liz McKeown noted that “notable falls in production and construction” contributed to May’s decline in GDP.
She pointed specifically to downturns in oil and gas extraction, car manufacturing, and the often-volatile pharmaceutical sector.
— AFP
