The UK economy returned to modest growth in May, offering a slight improvement after contracting in April, though the latest figures point to an economy still facing significant challenges as the country prepares for a change in political leadership.
Data released by the Office for National Statistics (ONS) showed that gross domestic product (GDP) grew by 0.1% in May, matching economists’ expectations and reversing the decline recorded the previous month. On a broader three-month basis, the economy expanded by 0.7%, exceeding forecasts of 0.5% but slowing from the 0.8% growth recorded in the previous three-month period. GDP had increased by 0.3% in March.
The latest figures indicate that the services sector remained the main driver of economic activity, while manufacturing and construction continued to struggle.
According to the ONS, services output rose by 0.3% in May after falling 0.1% in April. Growth was supported by information and communications technology, scientific research and professional services, sectors that account for a significant share of Britain’s business activity and employment.
In contrast, production output declined by 0.5% during the month, while construction activity fell by 0.8%, highlighting continued weakness in industries facing higher costs and softer demand.
The data arrives as Andy Burnham prepares to enter Downing Street next week, inheriting an economy that has slowed after a relatively strong start to the year. Although quarterly growth reached 0.6% during the opening months of 2026, rising energy costs and persistent inflation have increased pressure on businesses and consumers alike.
Higher fuel and energy prices have pushed up operating expenses across many sectors, squeezing profit margins for companies already coping with elevated borrowing costs and cautious consumer spending.
Economists expect the UK economy to grow between 0.9% and 1.1% this year, below last year’s expansion of 1.4%, reflecting the more challenging economic environment.
Ben Caswell, senior economist at the National Institute of Economic and Social Research, said growth is likely to remain subdued.
“Weakness in growth will continue into the third quarter,” Caswell said.
“With volatile energy prices, higher inflation on the horizon, and fragile public finances, the new Prime Minister inherits a stagflationary economy and will have just under three years to turn around a tough economic situation.”
The economic backdrop presents difficult choices for the incoming government, which has indicated it is considering measures including business rates relief for pubs and high street firms while also leaving open the possibility of changes to taxation.
For businesses, the latest figures provide cautious optimism rather than a clear turning point. The return to growth suggests the economy has regained some momentum, but the recovery remains uneven, with services carrying much of the burden while production and construction continue to face headwinds. Attention will now shift to the government’s first economic decisions and the autumn Budget, which is expected to outline its strategy for supporting growth while managing inflation and public finances.
