UK GDP Contracts 0.1% May Second Consecutive Month

The UK economy contracted for the second consecutive month in May 2025, with GDP falling by 0.1% following a sharper 0.3% decline in April, contrary to expectations of modest growth. The downturn was driven by significant drops in production output, including manufacturing, and construction activity, while the services sector showed only minimal growth. Analysts attribute some of the economic weakness to the impact of US tariffs, which have particularly affected the car manufacturing industry, and domestic challenges such as higher living wages and increased national insurance contributions. This economic slowdown poses a significant challenge for Finance Minister Rachel Reeves, who remains committed to revitalizing growth despite describing the figures as disappointing. The Labour government, led by Prime Minister Keir Starmer, faces mounting pressure amid calls for potential tax increases and the Bank of England's deliberations over interest rate cuts amid high inflation. The recent data casts doubt on the near-term economic outlook, undermining earlier gains driven by tax breaks and trade adjustments earlier in the year.