Just when things were starting to feel a bit more stable, the UK economy has thrown another curveball—this time right at the Chancellor, Rachel Reeves.
New figures show that the economy shrank again in May, making it the second month in a row of economic decline.
And if the trend continues into June, the country could officially be back in a recession.
GDP Falls Short of Expectations
According to the latest data, the UK’s gross domestic product (GDP) fell by 0.1% in May.
That might not sound like much, but it caught many analysts off guard—they were expecting a slight uptick.
This drop follows an even bigger decline of 0.3% in April.
And with two consecutive months of contraction now logged, there’s growing concern that we’re on the brink of a technical recession if June’s numbers come in negative as well.
Reeves Calls the Numbers ‘Disappointing’
Reeves didn’t shy away from the reality.
She admitted the latest economic performance was “disappointing,” especially as she’s already under intense pressure to fix the country’s stretched finances.
Behind closed doors, worries are mounting about the possibility of a significant tax hike later this year.
The Autumn Budget could include a £30 billion tax raid to plug the deepening hole in public finances.
What’s Behind the Shrinking Economy?
So what’s dragging things down? According to Liz McKeown, the Director of Economic Statistics at the Office for National Statistics (ONS), the biggest hits came from the production and construction sectors.
Oil and gas extraction slumped, car manufacturing slowed, and the pharmaceutical industry—known for its unpredictable swings—also dropped.
These declines were only partially cushioned by some gains in the service sector.
A Bit of Growth Earlier in the Year
There’s a small silver lining, though. McKeown pointed out that over the past three months overall, the economy still managed some growth.
That earlier bump likely came from businesses fast-tracking activity in February and March, giving a temporary boost that’s now fading.
Services Sector Holds On—Barely
Despite the gloomy headline numbers, some parts of the service industry did see improvement in May. Law firms, which had a tough April, bounced back.
And the tech side—particularly computer programming—had a good month.
But those gains were undercut by a steep decline in retail sales, showing that consumer spending remains shaky.
What’s Next for the UK Economy?
With pressure building and the clock ticking, Reeves faces a tough path ahead.
Another negative month could officially mark the return of a recession—something the government would be desperate to avoid.
All eyes will now be on June’s GDP figures and what Reeves decides to do in the Autumn Budget to prevent things from getting worse.
