UK economy shrinks for second month as growth falters in May

The UK economy contracted by 0.1% in May 2025, marking the second consecutive monthly decline and adding fresh pressure on Chancellor Rachel Reeves amid a fragile global outlook, according to figures released today by the Office for National Statistics (ONS).

The drop follows a sharper 0.3% contraction in April and comes despite a 0.4% expansion in March, a figure revised up from the previously reported 0.2%. Economists had expected modest growth of 0.1% in May, making the latest figures an unexpected setback for the government’s economic narrative.

The monthly fall in GDP was primarily driven by a steep 0.9% decline in production output, the sector’s second consecutive monthly drop. Construction also dragged on growth, with output falling 0.6% in May, reversing some of the gains seen in April. These declines were only partially offset by a modest 0.1% increase in services output, which represents the largest part of the UK economy.

“This remains a frustrating but solvable sticking point for thousands of firms across the country. It requires building a truly dynamic financial ecosystem that works for businesses —one where traditional banks, alternative lenders and fintechs collaborate to deliver capital with speed and precision.”

Despite the monthly weakness, the broader picture was more upbeat. The UK economy grew by 0.5% in the three months to May 2025 compared with the previous three-month period, supported by earlier gains in March and February. That quarterly growth was driven largely by the services sector, which expanded 0.4%, while production and construction grew by 0.2% and 1.2%, respectively.

The ONS noted that some of the earlier strength in the economy stemmed from activity being brought forward into the first quarter, particularly ahead of trade tensions following the re-election of US President Donald Trump and his administration’s renewed push on tariffs. Although the US has since paused its sweeping tariffs on UK goods, uncertainty continues to cloud the international trade environment.

Reeves faces growing domestic and international pressure to stabilise the UK’s economic footing while delivering on promises of growth and fiscal discipline. With inflation cooling and interest rates expected to ease later this year, analysts say policymakers at the Bank of England may face renewed calls to lower borrowing costs to support activity.

Randall noted: “Much of the Chancellor’s upcoming Mansion House speech is expected to focus on financial reform, but she must deliver action rather than words. With ambitious growth targets for the UK economy to meet, we cannot afford to leave growth on the back-burner.”