Growth in the UK economy was barely positive in May (+0.1%), wiping out April’s minus 0.1% figure. This development meant economic activity grew at all, yet this is against some earlier expectations that it would take a step sideways. This growth came amid data from the Office for National Statistics (ONS) which indicated that economic activity might have completely stagnated.

The domestic economy showed unexpected strength despite the war in Iran that has been a major source of increased global energy prices. GDP growth came in at 0.7% in the three months to May, which was a slight drop from the 0.8% growth in the previous quarter.

Outgoing Chancellor Rachel Reeves will be pleased that this data is proof that her ways at HM Treasury have worked. She joins the Prime Minister-in-waiting Andy Burnham as he is assembling a new cabinet for the UK Government on Monday.

Sector Performance and External Pressures

The services sector had a major bouncing-back effect on May’s economic recovery, rising a modest 0.3%. Scientific research and development was the largest factor in this monthly increase, with an impressive increase of 5.1%.

But there were some clear weaknesses in other parts of the economy that tempered the improvements. Industrial production (manufacturing) fell 0.5%, and construction industry production fell 0.8% from April.

The overall economic scene is still fragile, according to financial experts. Industrial and construction activity, especially, has been hard hit by geopolitical tensions, with the rebound being dishearteningly weak, said Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales (ICAEW).

Domestic business organisations are also calling on action to shield their business from external shocks. Rising energy prices and shipping disruption are generating ‘massive operational costs, and there’s a lot of uncertainty throughout the economy,’ says Stuart Morrison, research manager at the British Chambers of Commerce (BCC).