Monthly gross domestic product (GDP) fell by 0.1% in May, following a decrease of 0.3% in April and growth of 0.4% in March.
Production was one of the main downward drags, with output falling by 0.9%, following an unrevised fall of 0.6% in April. Construction output also fell by 0.6% in May.
Despite two consecutive monthly falls, GDP rose by 0.5% over the three months to May, driven largely by the services sector.
Industry experts say falling GDP means a cut to Bank Rate in August is now firmly on the table.
Richard Pike, chief sales and marketing officer at Phoebus, commented: “Another monthly contraction in GDP highlights just how fragile the UK’s economic recovery remains. While not unexpected given the broader slowdown in activity, it reinforces the view that momentum is stalling across the board.
“For the Bank of England, this adds further weight to the case for a rate cut, potentially as soon as August. Inflation is gradually easing, giving policymakers more room to act. However, any move is likely to be carefully measured. The Bank’s Financial Policy Committee (FPC) said on Wednesday that geopolitical tensions and trade disputes continue to pose risks to UK financial stability. With that in mind, the Bank will remain mindful of inflation risks and the potential impact of quantitative tightening, particularly in such a fragile growth environment.
“In this climate, firms across the financial services sector will need to remain agile, with technology playing a vital role in managing operational risk and ensuring continued service delivery.”
Derrick Dunne, CEO of YOU Asset Management, said: "May’s GDP figures are a reality check and a blow for a Government that has put economic growth at the centre of its agenda. After a solid first quarter, the economy has stumbled in both April and May. Right now, it feels like we’re taking one step forward, one step back, stuck in a kind of economic limbo.
“The services sector continues to prop up the numbers, but the drop in production and construction output is concerning. Add in the tense geopolitical backdrop – with persistent risks around global trade and conflict in the Middle East – and the outlook remains uncertain.
“The big question is: how will policymakers respond? While inflation edged lower in May, it’s still above target. Even so, we believe the weakening economy could tip the balance at the Bank of England, with a rate cut likely in August or September."
Jeremy Batstone-Carr, European strategist at Raymond James Investment Services, added: “Today’s data confirms that the growth recorded over Q1 2025 was a one-off occurrence, owing to economic activity pulled forward ahead of the US’s “Liberation Day” tariff deadline. Although the UK has struck a trade deal with the US, much of the detail is yet to be sorted out. Meanwhile, the delayed deadline for other countries has only prolonged uncertainties that have impacted UK growth.
“April’s GDP reversal provided clear evidence that there has not been a sustained improvement in economic activity, reinforced by yet another downbeat month (May GDP 0.1%) which leaves the economy on track for a shallow contraction once June’s data sees the end of Q2.
“Lying behind today’s subdued outturn is another slow month for industrial production, a fifth negative monthly result for the sector out of the past six. Manufacturing weakness was dominated by another month of subdued vehicle production despite being offset to some extent by activity in other areas as tariff-related uncertainty diminished slightly. In contrast the larger service sector proved more resilient. Although ancillary businesses impacted by tariff uncertainty in the industrial sector might have been affected, a warm month supported activity in consumer-facing leisure sectors.
“The Labour government will be hoping that the UK economy might generate momentum over the second half of the year, perhaps supported by further rate cuts from the Bank of England. However, this hopeful outturn remains uncertain, with growing fears that taxes might be increased again at the Autumn Budget. All hints suggest that the UK economy will suffer a very downbeat year in 2025, before staging a partial improvement in 2026.”
