Britain's Economy Falters Again: Implications for Growth and Policy

Britain's economy shrank for a second consecutive month in May, with GDP dropping 0.1%. Economists had expected a rise, but declines in industrial and construction sectors offset slight services growth. The contraction intensifies pressure on the Bank of England to cut interest rates and may force Finance Minister Rachel Reeves to raise taxes in her upcoming budget.

Britain's economy continued its unexpected decline for a second month in May, highlighting challenges for Finance Minister Rachel Reeves as global uncertainty looms larger. Official data revealed a 0.1% reduction in GDP following April's 0.3% fall, according to the Office for National Statistics.

Despite predictions of slight economic expansion, the weakening industrial and construction sectors overshadowed modest growth in services. This setback threatens expectations of economic growth in the second quarter of 2025, even as the Bank of England considers cutting interest rates amid surging inflation.

Prime Minister Keir Starmer's Labour administration faces mounting pressure, with potential tax increases on the horizon. This follows a strong start to 2025, spurred by tax breaks and trade adjustments. Yet, the latest figures suggest external and domestic issues are disrupting the government's growth strategy.

(With inputs from agencies.)