The UK economy returned to growth in May, but the expansion was modest as higher energy costs and disrupted supply chains from the Iran conflict weighed on activity. The Office for National Statistics (ONS) said output rose by 0.1% in May, driven by a rebound in services, even as production and construction contracted. This follows a slight dip in April, suggesting the economy weathered rising energy prices better than expected but remains fragile.
Over the three months to May, the economy grew by 0.7% compared with the previous three months, according to the ONS. Liz McKeown, director of economic statistics at the ONS, noted that computer programming and advertising led the upturn, with the pharmaceutical sector also performing relatively well amid volatility elsewhere. The pace of growth remained uneven, with the latest two months showing a softer picture after a stronger start earlier in the year.
The Iran war has pushed up oil and fuel prices and disrupted supply chains, with oil trading firmer in recent weeks. Since hostilities resumed between the US and Iran, crude has moved from around $72 a barrel to about $84, though it remains well below peaks seen earlier in the year. Firms across various sectors flagged the conflict as affecting activity, including some manufacturers, hospitality firms, travel agencies and entertainment companies.
Analysts cautioned that while May’s data offer a modest positive signal, the broader growth trajectory is uncertain. Fergus Jimenez-England of the National Institute of Economic and Social Research described growth as fragile, and Yael Selfin of KPMG warned that higher energy prices could constrain real incomes and undermine momentum. Paul Dales of Capital Economics described the May reading as a reasonable development for an incoming administration but stressed the need for sustained improvement to offset weakness elsewhere.
Treasury officials stressed the government’s plan had strengthened the economy, pointing to a G7-leading first quarter and OECD assessments of restored stability. Critics argued that higher taxes and policy choices could dampen any nascent recovery as the new prime minister assumes office.
As the political transition unfolds, the economy’s resilience will hinge on energy price trajectories, consumer spending, and private investment. The coming months will reveal whether May’s modest growth can be built upon or if renewed headwinds will prod the economy back toward stagnation.
