The Office for National Statistics (ONS) reported that in May, the UK economy expanded by 0.4%, surpassing expectations and recovering from zero growth in April. This growth was driven by strong performances in the retail and construction sectors. Construction experienced its fastest expansion in nearly a year, a significant increase of 1.9%, which was bolstered by housebuilding and infrastructure projects.
The recent general election highlighted economic growth, with the services sector, which includes businesses like hairdressers and hospitality, growing by 0.3%.
The new Labour Government has recently unveiled several measures aimed at boosting growth. Chancellor Rachel Reeves announced the reintroduction of housebuilding targets, an overhaul of planning restrictions, and an end to the effective ban on onshore wind farms in England. Additionally, a National Wealth Fund has been established to attract investment in infrastructure and green industries.
In the three months leading up to May 2024, the UK's gross domestic product (GDP) grew by 0.9%, the fastest rate in over two years, largely due to robust growth in the services sector.
Analysts suggest this unexpected growth may reduce the likelihood of the Bank of England cutting interest rates next month. Although inflation has fallen to the Bank's target of 2%, some members of the Monetary Policy Committee remain concerned about ongoing inflationary pressures. Interest rates, currently at a 16-year high of 5.25%, were previously raised to curb inflation.
Talk to us about your finances.
