In a surprising turn of events, the UK economy grew faster than anticipated in May, expanding by 0.4% following zero growth in April, according to the latest data from the Office for National Statistics (ONS). This positive development was driven by significant growth in the services and construction sectors, which grew by 0.3% and 1.9%, respectively. Over the three months leading up to May 2024, the economy saw a robust 0.9% growth compared with the previous three months.
Positive Indicators Across Sectors
ONS Director of Economic Statistics, Liz McKeown, highlighted the broad-based nature of this growth:
“The economy grew strongly in May with all the main sectors seeing increases. Many retailers and wholesalers had a good month, with both bouncing back from a weak April. Construction grew at its fastest rate in almost a year after recent weakness, with house building and infrastructure projects boosting the industry. Meanwhile, manufacturing also grew a little, led by food and drink firms.”
Small Businesses and Economic Policy
Martin McTague, National Chair of the Federation of Small Businesses (FSB), emphasized the need for continued support for small businesses:
“The good growth registered in May picks up the momentum from the strong economic expansion seen in the first quarter, following April’s lull. To achieve the Prime Minister’s ambition to drive wealth creation in every community, the new Government should look to quickly build on this result with further pro-growth policies targeted at small firms and self-employed people.”
McTague pointed to the upcoming King’s Speech as an opportunity for the new Labour Government to demonstrate its commitment to the success of the small business community. He highlighted the importance of planning reform, a Small Housebuilders Strategy, and an expanded tax-free shopping scheme to support economic growth.
Economic Outlook and Investment
Anna Leach, Chief Economist at the Institute of Directors, noted the impact of favorable weather and broader economic conditions:
“The warmest May on record helped stoke a stronger-than-expected recovery in GDP growth, driving activity in consumer-facing sectors like retail as well as supporting construction activity. It’s good to see manufacturing picking up as well, meaning that all the main sectors contributed to growth.”
Leach emphasized the role of improving real incomes, a strong labor market, and lower interest rates in supporting growth and business investment.
Long-Term Growth Challenges
Suren Thiru, Economics Director at ICAEW, discussed the challenges ahead:
“These figures confirm a robust rebound in economic activity as stronger services and construction output helped return the economy to growth. May’s GDP uptick may well have been followed by a June washout, with wet weather likely to have stifled output from key sectors of the economy, despite a helping hand to hospitality and some retailers from Euro 2024.”
Thiru warned that achieving a significant uplift in the UK’s growth trajectory would require substantial increases in productivity and addressing economic inactivity. He also noted that the strong GDP figures might delay any rate cuts in August.
Conclusion
The unexpected economic growth in May offers a glimmer of hope amid ongoing economic challenges. While the positive figures are encouraging, industry leaders emphasize the need for continued support and strategic policy implementation to sustain and build on this momentum. As the new government takes shape, its commitment to fostering a resilient and dynamic economy will be crucial in driving long-term growth and stability.
