Britain’s economy unexpectedly contracted for a second consecutive month in May, with GDP falling 0.1% following April’s 0.3% decline, according to official data released Friday. The surprise downturn—contrasting with economists’ forecasts of 0.1% growth—was driven by slumps in industrial production and construction, overshadowing marginal gains in services. The figures heighten concerns that the UK’s economic recovery is stalling, potentially jeopardizing second-quarter growth after a strong start to 2025. The data also intensified expectations of a Bank of England interest rate cut in August, with analysts calling the move “inevitable” despite recent inflationary pressures.
The weak performance deals a blow to Chancellor Rachel Reeves, who faces mounting pressure to revive growth amid global economic uncertainty. Economists now warn she may be forced to abandon her pledge against further tax hikes in the upcoming budget. “While today’s figures are disappointing, I am determined to kickstart economic growth,” Reeves said in response—a tacit acknowledgment of Labour’s struggles to deliver on its economic promises since taking office a year ago. The contraction follows a first-quarter surge that briefly made Britain the G7’s fastest-growing economy, though analysts attribute much of that boom to temporary factors like a expiring homebuyer tax break and pre-tariff stockpiling.
With May’s decline, the economy now risks tipping into a technical recession—defined as two consecutive quarters of contraction—if June’s data shows a 0.4% or greater monthly drop. The Bank of England had projected 0.25% growth for Q2, but achieving even flat quarterly performance now requires June’s output to avoid further declines. “The government’s growth plan appears derailed by external and domestic shocks,” warned S&P Global’s Raj Badiani, highlighting vulnerabilities from sluggish consumer spending and weak business investment. The figures arrive as global markets grapple with geopolitical tensions and shifting trade policies, including recent U.S. tariff hikes that initially boosted UK manufacturing activity.
Market reaction was swift, with bond yields falling as traders priced in a 70% chance of a BoE rate cut next month. The central bank’s dilemma—balancing stubborn services inflation against faltering growth—mirrors challenges facing other major economies. For Prime Minister Keir Starmer, the data underscores the limits of early policy wins, with voters increasingly questioning Labour’s ability to deliver sustained prosperity. As economists debate whether the slump reflects temporary volatility or deeper structural issues, all eyes turn to June’s GDP release—which could determine whether Britain’s economic winter extends into summer.