The UK economy grew by 0.1% in May, according to the Office for National Statistics (ONS), providing an early boost for incoming Prime Minister Andy Burnham as he prepares to take office. The figure exceeded expectations of flat growth and followed a 0.1% contraction in April.
Service Sector Drives Growth
The ONS reported that the service sector, which includes banks, restaurants, and other services, expanded by 0.3% in May. This growth was partially offset by declines of 0.5% in production and 0.8% in construction. Over the three months to May, GDP rose by 0.7%, following an upwardly revised 0.8% growth in the three months to April.
Challenges Ahead for Burnham
Despite the positive data, experts caution that Burnham faces significant economic challenges. Pantheon Macroeconomics noted that the May increase puts the economy on track for 0.3% growth in the second quarter, down from 0.6% in the first quarter. Rob Wood, an economist at Pantheon, said the resilience means interest rates are set for a “prolonged period” on hold, adding that “solid growth is one reason that a hike is more likely than a cut.”
Danni Hewson, head of financial analysis at AJ Bell, commented: “For incoming prime minister Andy Burnham, it’s a positive note to begin on. But 0.1% growth is hardly cause for celebration and certainly nowhere near the momentum needed if ordinary people are going feel the country is working for them. Mr Burnham will face tough choices when he finally gets his feet under the desk at Number 10.”
Tax Rise Speculation
Burnham is expected to appoint Shabana Mahmood as Chancellor, according to reports. The new government will face questions over potential tax increases to address fiscal challenges. The ONS also highlighted that the Middle East conflict, particularly the Iran situation, has disrupted global supply chains, affecting manufacturing, hospitality, travel, and entertainment sectors.
Living Standards Priority
TUC General Secretary Paul Nowak urged the new prime minister to make living standards the top priority. “Better growth in our economy is good news and essential for boosting jobs and incomes. But despite welcome improvements, the outlook remains uncertain - and up and down the country too many working people are still struggling to get by. Donald Trump’s illegal war has sent energy prices through the roof – and comes after years of bills increasing sharply. That’s why the new prime minister must urgently show working people that this government is on their side by making living standards his number one priority. That means cutting energy bills for most households - paid for by taxing banks’ eyewatering excessive profits.”
Economic Stability Needed
Fergus Jimenez-England, associate economist at the National Institute of Economic and Social Research (Niesr), said the incoming PM must prioritize economic stability. “Today’s data confirm that growth remains fragile,” he said. A Treasury spokesperson defended the current economic plan, stating: “We have the right economic plan which has put the UK in a much stronger position than two years ago with the fastest growth in the G7 in the first quarter and the OECD agreeing that we have restored stability.” Both the OECD and the International Monetary Fund have upgraded their UK growth forecasts for 2026.
