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UK Economy Returns to Growth in May as Services Output Rebounds

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UK Economy Returns to Growth in May as Services Output Rebounds

The British economy returned to growth in May after recording a contraction in the previous month, mainly driven by a recovery in the services sector, although businesses in several industries reported that the war in the Middle East impacted output.

The UK's gross domestic product grew 0.1% month over month in May, following a 0.1% decline in April, data from the Office for National Statistics showed Thursday. The latest reading came in better than market forecasts of zero growth.

The ONS primarily attributed the GDP expansion to a 0.3% rise in services output, following a 0.1% downtick a month before, largely due to a positive contribution from professional, scientific and technical activities. Meanwhile, the production and construction sectors showed falls of 0.5% and 0.8% in May, after respectively logging a revised 0.2% growth and 0.1% decrease in April.

The statistics agency said a number of businesses across various industries, including those in manufacturing, wholesale, land transport services, accommodation, and travel agencies, "mainly stated the conflict in Iran had an impact in terms of reduced output in May 2026."

On a yearly basis, the UK economy expanded 1.3% in May, against the prior revised 1.1% growth and the consensus estimate of a 1.4% gain.

"We're still a bit dubious about the UK's latest growth data. On the face of it, it looks great ... Yet there is still an active debate over how reflective this is of the underlying growth picture," ING said in a note.

"The bottom line is the UK economy probably has genuinely had a reasonable start to 2026 - albeit not quite as strong as these growth numbers suggest. More importantly, the impact of the Iran war and the spike in energy prices is likely to show more clearly over the summer," ING added. "We'd expect growth to slow to 0.1-0.2% in the third quarter, after what's now likely to be 0.4% in Q2."

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