UK economy grows more than expected in May

Mr Morgan added that road haulage also had a “busy” May, while travel agencies saw a jump in demand as people booked summer holidays.

However, while the economy grew, many businesses reported that an increase in fuel and electricity costs had forced them to put up their prices for customers, the ONS said.

The UK’s statistics body also cited price increases for metals, some foods including fish and other staples.

Both businesses and households are being hit by rising prices, which are surging at their fastest rate for 40 years due to record-high fuel and energy costs.

UK inflation, the rate at which prices rise, hit 9.1% in May, and is expected to reach 11% later this year.

The new chancellor Nadhim Zahawi, who is in the race to be the next leader of the Conservative Party and prime minister, said it was “great” to see the economy growing but added that he knew people were concerned by rising prices.

“We’re working alongside the Bank of England to bear down on inflation and I am confident we can create a stronger economy for everyone across the UK,” Mr Zahawi said.

But Rachel Reeves, Labour’s Shadow Chancellor, said economic growth was “still far too slow”.

“Instead of presenting the plans we need for a stronger, more secure economy, the Tories are spending every waking minute indulging in unfunded fantasy economics,” she added.

The British economy returned to solid growth in May, up by 0.5%, defying fears of a month of stagnation. The services sector drove half the growth, in particular health services including GP appointments. Monthly figures are volatile, but thanks to some upward earlier revisions, growth over the three months to May was 0.4%.

However, consumers showed signs of being squeezed by the cost of living with wholesale and retail dragging down the economy in May.

The ONS also said respondents to its surveys reported that they were passing on price increases to consumers including fuel, electricity, nickel, cobalt, aluminium, steel, paper, fish, and cooking oil.

The figures raise some hope of the economy avoiding a feared recession. But many expect the economy to have fallen back again in June. The figures for the full second quarter are released next month.

Tory MPs will cast their first votes in the leadership contest on Wednesday, but whoever replaces Boris Johnson is faced with the dilemma of how to tackle the soaring cost of living.

In June, the OECD think tank warned that the UK economy will grow more slowly than expected this year and will stagnate next year as consumers rein in their spending and commodity prices remain high.

Meanwhile, the International Monetary Fund has said that the UK will be the slowest growing economy among the world’s largest economies in 2023.

David Bharier, head of research at the British Chambers of Commerce, said May’s growth was “welcome news” but “masks serious underlying issues of growing imbalances within the economy”.

He said that “worryingly” its recent survey showed that longer term business confidence had begun to fall.

“The present political instability will have only exacerbated uncertainty among small firms,” he said.

“Alongside this, the economy is still facing massive structural issues – including uncertainty about the UK’s relationship with the EU, continued Covid lockdowns in China, supply chain breakdowns, and rocketing energy costs.” – bbc.com