Britain’s economy contracted for the second consecutive month in May 2025, according to the Office for National Statistics, marking a troubling trend that threatens the government’s growth agenda and raises questions about the UK’s economic resilience amid persistent inflationary pressures and global uncertainties.
The latest GDP figures reveal a concerning pattern of economic weakness that echoes previous periods of sustained contraction. Services output was the largest contributor to the monthly GDP fall, decreasing by 0.4%, whilst production output also decreased by 0.6%, though construction provided some relief with a 0.9% increase.
This back-to-back decline follows a familiar pattern that has characterised Britain’s economic performance in recent years. After the initial recovery from the pandemic, the UK economy has effectively flat lined, fluctuating between low growth and small contractions since January 2022, highlighting the structural challenges facing the nation.
The services sector, which forms the backbone of the UK economy, has been particularly affected. The 0.4% decline in services output represents a significant drag on overall economic performance, reflecting broader concerns about consumer spending, business investment, and confidence levels across key industries.
Manufacturing and production sectors have also struggled, with the 0.6% decrease underlining the challenges facing British industry. Supply chain disruptions, energy costs, and competitive pressures have combined to create a difficult operating environment for manufacturers.
However, the construction sector’s 0.9% growth provides a rare bright spot, suggesting that infrastructure investment and housing development continue to support economic activity despite broader headwinds. This resilience in construction may reflect ongoing government infrastructure programmes and regional development initiatives.
The Bank of England thinks that quarterly GDP growth is likely to slow to around 0.25% in the second quarter of 2025, indicating that policymakers are already factoring in weaker economic performance when setting monetary policy expectations.
The consecutive monthly contractions raise concerns about the UK’s ability to achieve the government’s growth targets for 2025. Growth is expected to cool in the second half of the year, according to economic forecasters, suggesting that the current weakness may persist longer than initially anticipated.
These figures will be closely scrutinised by the Bank of England as it considers future interest rate decisions. The central bank faces the challenging task of balancing growth concerns against persistent inflation pressures, with the latest GDP data potentially influencing the timing and magnitude of future policy adjustments.
The broader economic context shows that the UK economy is now around 3.1% larger than it was before the COVID-19 pandemic, but the recent weakness suggests that this recovery may be losing momentum.
For businesses and consumers, the consecutive monthly contractions signal continued economic uncertainty. Companies may delay investment decisions, whilst households could face ongoing pressure on living standards if the economic weakness translates into slower wage growth and higher unemployment.
The government will need to address these challenges through targeted policy interventions, whilst maintaining fiscal discipline to support long-term economic stability and growth prospects.
REFH – newshub finance
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