UK economy stuck in reverse in May

Danni Hewson
11 July 2025
  • UK GDP unexpectedly fell by 0.1% in May after a 0.3% fall in April – but over three months to May, GDP was up 0.5%
  • Production slumped 0.9% with many manufacturers having brought forward production to earlier in the year to beat tariffs
  • The service sector eked out 0.1% of growth, whilst retail sales disappointed

Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK GDP figures:

“After ‘Awful April’ the expectation was that the UK economy would have dusted itself off and at least managed to eke out a tiny amount of growth, but instead the country’s economic engine was stuck in reverse.

“The threat of Donald Trump’s tariffs meant that many manufacturers brought forward production to earlier in the year as US customers clamoured to import goods before taxes were imposed. A trade deal between the US and UK has mitigated some of the damage, but the uncertainty and delays in getting some of the measures across the line meant some businesses like Jaguar Land Rover simply stopped exporting for a time.

“The steel industry is still facing an agonising wait and whilst financial markets have broadly set aside the potential negative impact of tariffs for now, there are real concerns about the fallout from all this friction on global economic growth.

“Aside from those external forces there’s been plenty of domestic issues to subdue the UK economy. Retail sales have looked positively gloomy as consumers fought to balance their own books after all those bill increases.

“With the sun making an early appearance, some spending on spring essentials was brought forward to much earlier in the year than would normally be the case. People can only spend a pound once and there are only so many pot plants and BBQ accoutrements that any household needs.

“Changes to stamp duty which saw homebuyers rush to get purchases over the line before the deadline has resulted in a slump in the months after, although legal services have started to bounce back.

“A glimmer of good news can be found in the construction sector with new building work up 0.6%, bolstered by an increase in infrastructure projects. But that was offset by a fall in repair work to both homes and businesses which meant the sector overall contributed to the backward momentum.

“The biggest concern for the government has to be the impact of increased employment costs on hiring intentions. Updates from recruitment companies like PageGroup shine a light on the weakness in the labour market.

“If businesses aren’t growing and are putting investment and expansion plans on hold until they feel more confident, the weakness which seems to have become embedded in the UK economy will continue. There have been signs that confidence is improving slowly but it remains fragile, and the rest of the year looks set to be volatile.”

Danni Hewson
Head of Financial Analysis
Danni spent more than 19 years at the BBC, presenting and reporting on business news across a variety of programmes – including BBC Breakfast, BBC News Channel, BBC Look North and latterly Radio 5 Live’s flagship business programme ‘Wake up to Money’. She is now responsible for producing analysis and commentary across a broad range of subjects at AJ Bell, from financial markets, to economics and personal finance.

Contact details

Mobile: 07593 451 437

Email: danni.hewson@ajbell.co.uk

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