The United Kingdom economy recorded an unexpected second consecutive month of contraction in May, dealing an early setback to Prime Minister Keir Starmer’s Labour government as it aims to revive growth.
According to figures released Friday by the Office for National Statistics, Gross Domestic Product, dipped by 0.1 percent in May, following a sharper 0.3 percent decline in April.
Economists had predicted a modest increase of 0.1 percent for the month.
The latest data intensifies the challenges facing the new government, which is already navigating global economic headwinds, including lingering inflation and uncertainty related to U.S. trade policies.
Labour’s fiscal strategy heavily hinges on a rebound in growth, especially after recent reversals on proposed welfare reforms and energy subsidies for pensioners, which have strained its financial roadmap.
Reacting to the figures, Finance Minister Rachel Reeves acknowledged the difficulty ahead, saying the results were “disappointing” and emphasizing that there is “more to do.”
In an effort to stimulate the economy, Labour has promised to slash bureaucratic hurdles and unveiled a sweeping investment initiative targeting the struggling National Health Service and deteriorating public infrastructure.
Meanwhile, separate data from the ONS on Friday showed a slight recovery in UK exports to the U.S., which increased by £0.3 billion ($0.4 billion) in May.
This followed a steep decline in April triggered by U.S. tariffs introduced under President Donald Trump.
Lindsay James, investment strategist at Quilter, warned of the uphill task the government faces, stating: “Growth is becoming incredibly difficult to achieve for the government.” She added, “The plans put in place so far are unlikely to move the needle in the absence of improving business and consumer sentiment in an environment of ongoing cost pressures.”
ONS Director of Economic Statistics Liz McKeown highlighted the sectors that weighed most heavily on GDP, noting “notable falls in production and construction.”
She added that the drop in production was largely due to weaker output in “oil and gas extraction, car manufacturing and the often-erratic pharmaceutical industry.”
