The UK economy returned to marginal growth in May, although expanding service industries continued to mask weaker output from production and construction.
Office for National Statistics estimates show that gross domestic product increased by 0.1% during the month, following a revised contraction of 0.1% in April.
Services output rose by 0.3% and made the principal contribution to growth. Production declined by 0.5%, while construction output fell by 0.8%, reinforcing the uneven distribution of activity across the economy.
Over the three months to May, GDP increased by 0.7% compared with the preceding three month period. It was the sixth consecutive increase on that basis, with services again driving the expansion through growth of 0.7%.
May’s monthly improvement provides a firmer picture after April’s decline, but the figures do not show a broad acceleration. Consumer services, professional activities, and parts of the information economy have proved more resilient than capital intensive industries exposed to energy costs, weak global demand, and delayed investment.
Recent employment data from the smallest UK companies present a similar picture of cautious expansion. Small business employment increased modestly in June, with professional services accounting for much of the gain.
The QuickBooks Small Business Index estimated that companies employing between one and nine people had added almost 9,000 jobs compared with June 2025. Professional services contributed more than 6,000 positions between May and June, suggesting that demand for specialist expertise remained relatively firm even as wider recruitment stayed subdued.
Companies appear willing to purchase legal, financial, technology, consulting, and other professional support, while remaining cautious about major physical investments or large additions to permanent headcount. That combination can sustain service activity without generating the broader capital expenditure associated with a stronger industrial recovery.
Conditions in manufacturing remain notably weaker. Manufacturing order expectations recently fell to their lowest level in six years, reflecting weak domestic demand, difficult export markets, and persistent cost pressure.
A prolonged divide between services and industry would have consequences beyond the headline growth rate. Service activity can support employment and tax receipts, but continued weakness in production and construction constrains productivity, infrastructure delivery, regional investment, and the depth of domestic supply chains.
Construction is particularly sensitive to borrowing costs, planning delays, public project timetables, and confidence in future demand. Falling output affects not only major contractors but also architects, engineers, materials suppliers, logistics operators, and smaller subcontractors whose cash flow depends on a reliable project pipeline.
Industrial companies face a different combination of difficulties. Energy intensive manufacturers continue to manage high input costs, while exporters must contend with uncertain overseas demand and changing trade arrangements. Investment decisions are also being shaped by automation requirements, decarbonisation expenditure, and shortages in technical occupations.
Regional performance may become increasingly uneven when growth depends heavily on services. Areas with large professional, financial, technology, or public sector economies can remain comparatively resilient, while regions with greater exposure to manufacturing and construction experience weaker demand and investment.
The ONS estimate remains subject to revision, and a monthly change of 0.1% is too small to establish a durable trend by itself. The three month expansion provides stronger evidence of underlying momentum, although its composition suggests that activity remains concentrated within a limited part of the economy.
The figures also complicate the Bank of England’s assessment of interest rates. Weakness in production and construction may support the case for lower borrowing costs, but policymakers must weigh that against wage growth, service inflation, and the risk that an early reduction would delay the return to price stability.
Borrowing conditions will remain influential for companies considering property, equipment, acquisitions, or larger recruitment programmes. Even where demand has stabilised, the cost of finance can prevent investment from proceeding or reduce the scale of planned projects.
Household conditions are another constraint. Real income growth can support consumer services, but higher housing, energy, and borrowing costs continue to limit discretionary expenditure. Retail, hospitality, and leisure businesses therefore face a customer base whose confidence may not improve at the same rate as headline GDP.
Overall output is expanding, small company employment has shown resilience, and professional services continue to recruit. Manufacturing orders, construction activity, and industrial production, however, still point to caution and uneven demand.
A stronger recovery would require greater business investment, more construction activity, improved export performance, and renewed production growth rather than continued reliance on services to compensate for weakness elsewhere.
May’s increase reduces the immediate risk of another contraction, but it leaves the economy’s underlying imbalance intact. The next GDP release, covering June and the second quarter, will indicate whether the improvement developed into broader momentum or remained another small fluctuation around a low growth path.
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