Britain’s economy returned to growth in May — but the fragile recovery is being squeezed by rising energy costs, global disruption and the fallout from the Iran conflict.
Official figures from the Office for National Statistics showed gross domestic product (GDP) increased by just 0.1 per cent in May, following a similar-sized contraction in April.
The weak rebound highlights the pressure facing the economy after a stronger start to the year, with businesses warning that war-driven disruption in the Middle East is pushing up costs and damaging confidence.
The modest May expansion was driven largely by the services sector, which grew 0.3 per cent during the month.
But the recovery was held back by sharp falls elsewhere, with production output dropping 0.5 per cent and construction declining 0.8 per cent.
The figures underline the uneven nature of Britain’s recovery, with consumer-facing industries showing resilience while manufacturers and builders continue to face higher costs and weaker demand.
The economy had expanded by 0.3 per cent in March before slipping backwards in April — the first monthly decline for eight months.
Over the three months to May, GDP increased 0.7 per cent, although this was slightly lower than the 0.8 per cent growth recorded in the previous three-month period.
The ONS said companies across a wide range of industries had reported disruption linked to the conflict in Iran.
Manufacturers, hospitality businesses, travel companies and entertainment firms all highlighted the impact of rising uncertainty and supply chain problems.
“A common theme of comments received by the monthly business survey was disruption in global supply chains because of the conflict in Iran,” the ONS said.
Economists warned that the damage could intensify if energy prices continue climbing.
With the Middle East crisis entering its fifth month and diplomatic efforts between Washington and Tehran faltering, analysts fear higher fuel and energy costs could weigh heavily on growth for the rest of the year.
Economists at Pantheon Macroeconomics said the May figures suggest the economy is on course for growth of around 0.3 per cent in the second quarter, down from 0.6 per cent in the first three months of the year.
Fergus Jimenez-England, associate economist at National Institute of Economic and Social Research, warned the next Prime Minister would inherit a fragile economic situation.
“Today’s data confirm that growth remains fragile, with both production and construction sectors falling, and services keeping the economy afloat,” he said.
“The growth outlook is further threatened by volatile energy costs which will likely dampen economic activity in the near future.”
Despite the weak monthly performance, economists said the resilience of the economy means the Bank of England is unlikely to rush into cutting interest rates.
Pantheon economist Rob Wood said rates were likely to remain unchanged for a “prolonged period”, adding that stronger-than-expected growth made a future rate rise more likely than an immediate cut.
The Bank’s next interest rate decision is due on July 30, alongside its latest economic forecasts.
The Treasury insisted Britain was in a stronger position than two years ago, pointing to strong first-quarter growth and improved forecasts from international bodies including the Organisation for Economic Co-operation and Development.
But with energy markets on edge and global supply chains under pressure, the latest figures suggest the UK recovery remains vulnerable to shocks beyond its control.
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