UK Economy Grows 0.1% in May Amid Leadership Transition

The Office for National Statistics reported that the United Kingdom economy grew by 0.1% in May, reversing a 0.1% contraction seen in April. This growth was primarily driven by a 0.3% increase in services output, with particular gains in pharmaceuticals, computer programming, medical research, and advertising.

These gains were offset by a 0.8% shrinkage in construction and a 0.5% decline in industrial production, the latter led by a 4.6% drop in mining and quarrying. The Office for National Statistics noted that conflict in Iran and resulting global supply chain disruptions impacted the hospitality and manufacturing sectors. Despite these headwinds, annual GDP rose 1.3% in May, marking the largest yearly increase in 10 months, while the total trade deficit fell to GBP 1.04 billion.

The data arrives during a leadership transition as Andy Burnham prepares to replace Keir Starmer as prime minister on Monday. While HM Treasury defended the current economic plan as having restored stability, the OECD forecast GDP growth at 0.9% for the year, citing domestic political uncertainty and conflict in the Gulf as risks. The Bank of England is scheduled to decide on interest rates on July 30.