UK Economy Shrinks 0.1% May Second Consecutive Decline

The UK economy contracted by 0.1% in May 2025, marking the second consecutive month of decline, primarily driven by a 1% fall in manufacturing output and a 0.9% drop in production, including significant decreases in oil and gas extraction, car manufacturing, and pharmaceuticals. Despite this, the services sector showed modest growth of 0.1%, supported by strong performances in legal and IT sectors, partially offsetting the declines in production and construction. The economic downturn follows a 0.3% contraction in April and reflects ongoing challenges such as the impact of US tariffs on UK car manufacturing, which, although paused, have contributed to financial uncertainty. Analysts suggest that while some headwinds like tariffs and housing market adjustments may be temporary, elevated labor costs and rising taxes pose ongoing risks, creating an uncertain macroeconomic outlook. The pound weakened against the US dollar in response to the disappointing GDP figures, highlighting investor concerns about the UK’s economic trajectory. Overall, despite quarterly growth driven by earlier activity, the recent monthly contractions raise concerns about the sustainability of the UK’s economic recovery.