Rachel Reeves wants to boost Britain’s economic growth, but the latest figures show GDP fell in May.
Do you trust Rachel Reeves with Britain’s economy? (Image: Getty)
Rachel Reeves’ ability to steer Britain’s economy is being questioned again after economic growth fell unexpectedly in May. The Office for National Statistics (ONS) said on Friday (July 11) that gross domestic product shrank by 0.1% in May after a 0.3% drop in April. Most economists expected the economy to rebound with slight growth of 0.1% in May.
The economy could now be heading for a contraction overall in the second quarter of the year in what would be a blow to Ms Reeves and the Government’s key aim to turbocharge economic growth. The Chancellor said the figures were “disappointing” but renewed her pledge to get more money in people’s pockets.
Shadow Chancellor Mel Stride said the May GDP figures would “pile even further pressure for tax rises in the autumn”. He said: “Under Labour – taxes hiked, inflation and unemployment up and growth stagnant. We can’t afford Labour.”
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The ONS data showed the construction sector contracted by 0.6% in May in a sharp reversal of 0.8% growth in April. The services sector expanded by 0.1% in a bounce back after an upwardly revised 0.3% decline in April.
Economist Matt Swannell, at the EY Item Club, said it was “all but certain” GDP would contract overall between April and June as US tariffs continue to weigh on activity.
Rob Wood, at Pantheon Macroeconomics, said he believed there were “signs that GDP growth can rebound in June”, which would help eke out growth in the quarter.
Suren Thiru, Economics Director at the Institute of Chartered Accountants in England and Wales, said: “The UK’s growth trajectory in the near term is likely to tilt downwards as any uplift from higher consumer and Government spending is hampered by escalating business caution, amid fears of further tax rises in this autumn’s budget.
“The lack of momentum in the UK economy indicated by these sluggish figures means an August interest rate cut currently looks inevitable, despite the recent spike in inflation.”
