UK Economy: Growth Returns in May Despite Middle East Tensions
Britain’s economy expanded modestly in May as stronger services activity offset declines in manufacturing and construction, while rising energy prices continued to weigh on the outlook.
Official data shows the UK economy returned to modest growth in May.
UK Economy returned to growth in May, with official figures showing a modest recovery after a slight contraction in April, although ongoing tensions in the Middle East continue to pose risks to Britain’s economic outlook.
The Office for National Statistics (ONS) reported that the economy expanded by 0.1% in May, driven mainly by stronger performance in the services sector. However, declines in production and construction limited the overall pace of growth.
Over the three months to May, the UK economy grew by 0.7% compared with the previous three-month period, reflecting a solid start to the year despite weaker momentum in recent months.
Liz McKeown, Director of Economic Statistics at the ONS, said the economy delivered robust growth over the three-month period, although activity slowed during April and May. She noted that computer programming, advertising and the pharmaceutical industry made significant contributions to economic output.
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The UK economy lost momentum after renewed conflict involving the United States, Israel and Iran disrupted global markets. Rising geopolitical tensions pushed up oil and fuel prices while creating supply chain challenges for several industries.
According to the ONS, businesses across manufacturing, hospitality, travel and entertainment reported that the conflict had affected their operations and reduced economic activity.
Yael Selfin, Chief Economist at KPMG, said warmer weather and the FIFA World Cup could support consumer spending during June and July. However, she warned that stronger household spending may not fully offset weakness in other sectors of the economy.
Selfin also cautioned that higher energy prices, driven by escalating tensions in the Middle East, could slow future economic growth as tighter financial conditions increase pressure on businesses and consumers.
Since fighting between the United States and Iran resumed last week, global oil prices have climbed from around $72 to $84 per barrel, although prices remain below the highs of approximately $120 per barrel recorded earlier this year.
Paul Dales, Chief UK Economist at Capital Economics, described the latest growth figures as positive news for incoming Prime Minister Andy Burnham, but warned that rising energy costs continue to squeeze household incomes and could limit future economic expansion.
Responding to the latest figures, a UK Treasury spokesperson said the government remained confident in its economic strategy, pointing to strong first-quarter growth among G7 economies and the restoration of economic stability.
