The UK economy contracted in May as it continued to perform sluggishly, official figures show.
The economy shrank by 0.1%, partly down to the extra bank holiday for the King’s Coronation, which meant there was one fewer working day than normal.
The UK has barely grown since 2019, before the pandemic, with one expert describing the economy as “listless”.
The rising cost of living and higher interest rates have been squeezing households and businesses.
Chancellor Jeremy Hunt said: “While an extra bank holiday had an impact on growth in May, high inflation remains a drag anchor on economic growth.
“The best way to get growth going again and ease the pressure on families is to bring inflation down as quickly as possible. Our plan will work, but we must stick to it.”
May’s decline followed growth of 0.2% in April, the Office for National Statistics (ONS) said.
It said the manufacturing, energy and construction sectors fell in May, along with sales at pubs and bars.
But it said the health sector recovered while the IT industry had a “strong month”. Strikes also had less of an impact on the economy than in April.
The coronation – which meant there were three bank holidays in May, rather than the usual two – led to a slowdown in some industries, the ONS said, but benefited others such as those in arts and entertainment.
For most people, economic growth is good. It usually means there are more jobs and companies are more profitable and can pay employees and shareholders more.
The higher wages and larger profits seen in a growing economy also generate more money for the government in taxes.
It can choose to spend more on benefits, public services and government workers’ wages, or cut taxes.
When the economy shrinks, these things can go into reverse – but governments normally do still have a choice on public spending.
Capital Economics said that the 0.1% fall in May “isn’t as bad as it looks as some of it was due to the extra bank holiday for the King’s Coronation”.
It added that GDP – the official measure of economic growth – was on track to rise by around 0.1% in the three months to June.
“Our sense is that underlying activity is still growing, albeit at a snail’s pace,” said Paul Dales, its chief UK economist.
But Samuel Tombs, chief UK economist at Pantheon Macroeconomics, warned that May’s figures showed growth “remains listless”.
And Martin Beck, chief economic adviser to the economic forecasting group the EY Item Club, said the “bigger picture is the economy remains weak”.
“It didn’t grow at all in the three months to May, and in May the economy was only 0.2% bigger than its size just before the Covid pandemic struck, so we’ve seen next to no growth since the end of 2019.”
Inflation – the annual rate at which prices rise – remains stubbornly high at 8.7%.
The Bank of England has been putting up interest rates to try to slow price rises but this is having a knock-on effect on consumer borrowing costs, driving up mortgage and loan repayments for millions.
