The UK’s private sector contracted for a second consecutive month in May, casting a shadow over hopes for sustained economic recovery after a strong start to the year. The latest S&P Global/CIPS purchasing managers’ index (PMI) rose slightly to 49.4 in May from April’s 48.5 but remained below the 50 mark that indicates growth — signalling continued contraction in economic activity.
The figure marks the second-lowest reading in nearly a year and a half, highlighting the fragile state of the UK economy amid persistent inflation, trade concerns, and rising wage costs.
The disappointing PMI results follow recent data showing a 0.7% rise in GDP during the first quarter — the fastest growth in two years. However, economists now warn that this momentum may not carry into the second quarter, as pressures on business confidence and consumer demand mount.
While the dominant services sector, which makes up more than 75% of the UK economy, showed marginal improvement — climbing to 50.2 in May from 49.0 — the manufacturing sector continued its decline. The manufacturing PMI dropped to 45.4, the lowest level in two months and a clear signal of worsening output. It marks the sharpest contraction in manufacturing since October 2023.
“Although there has been some relief on the trade front, with a temporary pause on US tariffs and a partial deal, business confidence remains fragile,” said Chris Williamson, chief economist at S&P Global. “The latest data points to continued caution, with companies facing high staff costs and softening demand.”
Manufacturers have been hit hardest, grappling with post-Brexit uncertainty, investment delays, and reduced discretionary spending by consumers. The PMI report also highlighted a surge in job cuts, particularly in industry, as firms contend with increased national insurance and minimum wage costs implemented in April.
Analysts at Capital Economics said the April and May PMI figures are consistent with a 0.2% contraction in GDP for the second quarter, potentially marking the worst quarterly performance since late 2023.
The slowdown in the UK mirrors broader weakness across Europe. The eurozone’s composite PMI also dipped below the growth threshold in May, falling from 50.4 to 49.5, reflecting shared challenges facing advanced economies.
With the UK government preparing for its next spending review and the Bank of England monitoring inflation and growth trends closely, the latest figures are expected to add pressure for targeted fiscal and monetary interventions — particularly to support the struggling manufacturing sector and prevent a broader economic downturn.
