The UK economy grew 0.1% in May, recovering from a 0.1% contraction in April, according to Office for National Statistics data released this morning.
Danni Hewson, head of financial analysis at AJ Bell, said the reading was “hardly cause for celebration and certainly nowhere near the momentum needed” for people to feel the economy is working for them.
The service sector was the only part of the economy to expand, offsetting falls in both production and construction. Over the three months to May, the economy grew 0.7%, although that was driven largely by a strong March.
Growth arrives as Labour prepares for a change of leadership. Hewson called the reading “a positive note” for incoming prime minister Andy Burnham to begin on, though speculation over his top team continues and households brace for what Hewson called “another long autumn of consumer caution” over potential tax rises.
Neil Birrell, chief investment officer at Premier Miton, said the growth figure “feels rather historic” given the lack of clarity over fiscal and social policy under a new administration, adding that businesses and individuals are unlikely to hire or spend “ahead of getting policy details”.
Rob Morgan, chief investment analyst at Charles Stanley Direct, struck a similarly cautious note. He pointed to a summer boosted by “football-fuelled” consumer spending but warned that a softening jobs market, a higher energy price cap and the approach of “what stands to be a seismic autumn Budget” could sap confidence as the year progresses.
Attention has already turned to who will run the Treasury. Reports that Shabana Mahmood is now front-runner for chancellor have calmed market nerves but Michael Browne, global investment strategist at Franklin Templeton, argued that Ed Miliband, tipped by some as a potential chancellor, deserves closer scrutiny.
Miliband's 2015 manifesto promised to cut the deficit every year and refuse a budget without Office for Budget Responsibility sign-off, a platform Browne called “remarkably restrained” by today's standards.
The fiscal picture Miliband would now inherit is tougher. Taxation reached a post-war high of 36.3% of GDP in April 2026, up from 32.5% in 2015, and debt interest now consumes a tenth of government income. But Browne noted the OBR projects borrowing falling to around 2% of GDP by 2029-30, similar to pre-pandemic levels.
“The cautious, fiscally grounded politician of 2015 may be precisely what this moment demands,” he said. “The question is whether the intervening decade has sharpened that instinct or eroded it.”