UK Economy Contracts Again Amid Tariffs and Taxes

The UK economy unexpectedly contracted by 0.1% in May 2025, following a 0.3% decline in April, marking the second consecutive month of contraction, according to the Office for National Statistics. The downturn was driven by notable declines in manufacturing and construction, which fell by 0.9% and 0.6% respectively, while the services sector posted marginal growth. The contraction surprised economists, who had anticipated modest growth, as the economy faced headwinds from recently implemented US tariffs under President Trump and recent domestic tax increases. Earlier growth in 2025 was primarily due to businesses accelerating activity to avoid new tariffs and take advantage of expiring tax breaks. Analysts now warn of downside risks for the remainder of the year, despite the Bank of England's revised full-year forecast of 1% growth. Fiscal pressures from rising debt interest, stubborn inflation, and the prospect of further spending cuts or tax increases are increasing concern about the UK's economic outlook.