The Office for National Statistics has revealed that Britain’s economy shrank slightly in May, with GDP falling by 0.1 per cent as suspected causes points towards an extra bank holiday on top of the cost-of-living squeeze, and public sector strikes.
During May, the report highlighted that that the dominant services sector stagnated, production output fell by 0.6 per cent and the construction sector fell by 0.2 per cent, while the GDP results were reported to be slightly higher than the 0.3 per cent fall that City economists predicted.
Despite results being slightly more positive than expected, May’s contractions means that monthly UK GDP is now estimated to be just 0.2 per cent above its pre-coronavirus levels set in February 2020.
Experts say the news that the UK economy shrank in May will not deter the Bank of England from raising interest rates again to fight inflation as the Chancellor proposes that resist to public sector pay rises will be beneficial in the long run.
Khalid Talukder, Co-Founder of DKK Partners commented: “While a decline in GDP may shake the confidence of individuals and businesses across the nation, we must remain positive as the economic outlook remains brighter than what was expected at the back end of last year. We narrowly missed an expected technical recession and we have also witnessed months of growth, highlighting that the economic progression is not wholly negative. As the government realigns on how to support SMEs, businesses must remain confident as they support our nation through difficult times, promoting innovation, attracting international investment and solidifying the UK as a tech and financial hub, which will ultimately promote future growth.
Jeremy Hunt, Chancellor of the Exchequer, commented: “While an extra bank holiday had an impact on growth in May, high inflation remains a drag anchor on economic growth.
“The best way to get growth going again and ease the pressure on families is to bring inflation down as quickly as possible.
“Our plan will work, but we must stick to it.”