UK economy unexpectedly contracts in May
By Abigail Townsend
Date: Friday 11 Jul 2025
(Sharecast News) - British GDP eased in May, government data showed on Friday, weighed down by faltering performances in manufacturing and construction.
According to the Office for National Statistics, monthly GDP fell by 0.1%. Most analysts had expected a 0.1% uplift, though it remained a marginal improvement on April's 0.3% decline.
Monthly services grew by 0.1%, following a 0.3% fall in the preceding month.
But production slid 0.9%, compounding the previous month's 0.6% decline, while construction all but reversed April's 0.8% growth, down 0.6%.
In the three months to May, however, real GDP was estimated to have grown 0.5% overall. That was supported by a rise of 0.4% in March, and strength in the service sector.
Liz McKeown, director of economic statistics at the ONS, said: "May's fall in production was driven by oil and gas extraction, car manufacturing and the often-erratic pharmaceutical industry."
The UK economy continues to face a number of global and domestic headwinds, from Donald Trump's swingeing tariff regime, and high interest rates to mounting costs - including a recent uptick in inflation - and weak consumer sentiment.
The Bank of England next meets to discuss rates in August and is widely predicted to trim the cost of borrowing in what would be its third reduction so far this year.
Year-on-year, GDP rose by 0.7% in May, in line with consensus.
Ben Jones, lead economist at the CBI, said: "Today's data suggests that a sluggish recovery remains the likeliest path in the near-term amid persistent trade uncertainty, a loosening labour market and slowing growth in real incomes. And with business costs rising, many firms are maintaining a cautious approach to investment."
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "This is a setback for Rachel Reeves, who is already wedged in between a rock and a hard place when it comes to public finances. A fall in activity is likely to hit tax receipts, just at a time when there's a bigger hole to fill after the government was forced to backtrack on spending cuts to welfare."
Matt Swannell, chief economic adviser to the EY Item Club, said: "Having recorded a very strong start to the year, May's soft GDP reading makes it all but certain that growth will slow sharply in the second quarter.
"Beyond the potential anomalies in the most recent GDP data, headwinds to growth will likely persist over the remainder of this year and into next. US trade policy is expected to limit access to the UK's most important export market, and closer to home, tighter fiscal policy and the lagged effect of past interest rate rises will continue to weight on growth prospects."
The ONS also published data on Friday showing the total goods and services trade deficit widened by £6.7bn to £13.2bn in the three months to May.
The value of both imports and exports rose by £0.6bn, a 1.2% and 2.2% increase respectively.
There was a 2.9% rise in exports to the European Union, to £14.4bn, while exports to non-EU countries were 1.5% higher, at £14.7bn.
Exports to the tariff-heavy US market rose by £0.3bn to £4.4bn.
Following Trump's so-called Liberation Day on 2 April, there was a slump in sales to the US, with exports sliding to £4.1bn from £6.1bn in March.
May's marginal improvement was supported by the UK securing a trade deal with Washington, which came into effect at the end of June. But the ONS acknowledged the value of goods exported to the US in May "remained relatively low".
It continued: "There has been considerable changes in the US international trade policy in recent months, which has posed challenges for UK businesses."
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN