UK economy shrinks again in May, raising new worries over outlook
Gross domestic product declined by 0.1% after a 0.3% drop in April, the Office for National Statistics said.
Economists polled by Reuters had mostly forecast that gross domestic product would rise by 0.1% from April's level. While the services sector eked out a sliver of growth, declines in industrial output and construction dragged down overall output.
The reading poses downside risks to expectations that the economy grew in the second quarter of 2025, after a surge early in the year.
Britain's economy expanded rapidly in the first quarter of 2025, outstripping growth in other countries in the Group of Seven advanced economies. In May the Bank of England revised up its full-year growth forecast to 1%.
However, much of the growth in early 2025 was likely to have been linked to the expiry of a tax break for some home purchases in April which boosted the sector before the deadline, and a rush by manufacturers to beat higher US import tariffs.
The BoE has said it thinks the economy grew by about 0.25% in the second quarter of 2025. To achieve any growth for the quarter, the ONS said June's monthly data would need to show at least a flat reading.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
RTÉ News
a day ago
- RTÉ News
UK economy shrinks again in May, raising new worries over outlook
Britain's economy contracted unexpectedly for a second month running in May, underlining worries about momentum going into the second half of the year in an increasingly uncertain global environment, official data showed today. Gross domestic product declined by 0.1% after a 0.3% drop in April, the Office for National Statistics said. Economists polled by Reuters had mostly forecast that gross domestic product would rise by 0.1% from April's level. While the services sector eked out a sliver of growth, declines in industrial output and construction dragged down overall output. The reading poses downside risks to expectations that the economy grew in the second quarter of 2025, after a surge early in the year. Britain's economy expanded rapidly in the first quarter of 2025, outstripping growth in other countries in the Group of Seven advanced economies. In May the Bank of England revised up its full-year growth forecast to 1%. However, much of the growth in early 2025 was likely to have been linked to the expiry of a tax break for some home purchases in April which boosted the sector before the deadline, and a rush by manufacturers to beat higher US import tariffs. The BoE has said it thinks the economy grew by about 0.25% in the second quarter of 2025. To achieve any growth for the quarter, the ONS said June's monthly data would need to show at least a flat reading.
Irish Independent
2 days ago
- Irish Independent
Over €10bn aid pledged to Ukraine as plan for peace troops ‘ready to go'
©Reuters Participants in a Rome conference on the economic recovery of Ukraine have pledged over €10bn to help the war-torn country, Italian prime minister Giorgia Meloni said on Thursday. The conference, attended by political leaders including Ukraine's president Volodymyr Zelensky, is taking place against a backdrop of further intense drone and missile attacks on Kyiv. Register for free to read this story Register and create a profile to get access to our free stories. You'll also unlock more free stories each week.
RTÉ News
2 days ago
- RTÉ News
UK workforce exposed if global trade war gets worse
Trade tariffs could increase the risk of some businesses falling behind on loans, while a high proportion of the UK workforce is in sectors more exposed to global shocks, the Bank of England has warned. Households and businesses nonetheless remain resilient, and the UK banking system is equipped to support them even if conditions significantly worsen, the Bank's Financial Policy Committee (FPC) said in its latest report. The FPC said there was a high degree of unpredictability about how global trade will evolve, with US President Donald Trump hiking tariff rates in April but negotiations with other countries over possible trade deals ongoing. Conflict in the Middle East has also raised the risk of energy prices spiking, particularly if the supply of oil and gas were disrupted, it found. This could particularly impact businesses that are more reliant on financing linked to global financial markets, which have faced turbulence in recent months. "The potential for much higher trade tariffs increases the likelihood of corporate default in the most exposed sectors, and losses for their lenders," the FPC's Financial Stability Report read. The outlook for the UK is weaker and more uncertain than it was in November, when the committee previously produced a report, it said. An escalating trade war could weigh on UK businesses should global consumer demand weaken, lending conditions tighten, or reduced availability of funding causes firms to slow down investment. "Further shocks could particularly impact firms in sectors dependant on demand from the US market, such as manufacturing," the report read. These sectors, as well as others like retail, are more vulnerable to a drop in consumer demand and are less able to recover earnings by raising prices. Analysis for the Bank of England suggests that firms in sectors likely to be more impacted by the global trade shock, either directly or indirectly, account for around 60% of UK employment. However, the FPC concluded that despite pockets of vulnerability, UK businesses would typically be able to pay their debts even in the face of further global volatility such as lower demand and supply. Furthermore, the report found that the UK banking system has the capacity to support households and businesses even if economic and business conditions became substantially worse than expected. Meanwhile, the committee warned that intensifying geopolitical tensions could raise the risk of cyber attacks around the world. It said this was a "global challenge" but that UK financial firms were generally prepared to deal with cyber incidents.
