UK economy shrinks in May as GDP falls 0.1% – what it means for your money
THE UK economy fell by 0.1% in May, the latest figures from the Office for National Statistics (ONS) show.
It came after a small 0.2% growth in April which was largely driven by car sales rebounding and education partially recovered from the effect of the previous month’s strikes.
The main driver of the fall was the extra bank holiday weekend for the King's Coronation, the ONS reports.
Looking at the broader picture the ONS said GDP (Gross Domestic Product) showed no growth in the three months to May 2023.
GDP measures the value of goods and services produced in the UK.
It also estimates the size of and growth in the economy.
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Economists had been expecting the economy to shrink slightly more. Deutsche Bank thought the monthly GDP decline would be 0.3%, and some had predicted 0.5%.
Monthly GDP is now estimated to be 0.2% above its pre-pandemic levels of February 2020.
Services also showed flatlined in the three months to May, while production grew by 0.4% and construction grew by 0.2%.
The ONS also pointed out that despite the extra May Bank Holiday for the King's coronation, bars and pubs actually saw a drop in sales compared to the previous month.
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It also meant sectors like construction and finance lost a working day in the month.
ONS director of economic statistics Darren Morgan said: "GDP fell slightly as manufacturing, energy generation and construction all fell back with some industries impacted by one fewer working day than normal.
"Meanwhile, despite the Coronation Bank Holiday, pubs and bars saw sales fall after a strong April. Employment agencies also saw another poor month.
"However, services were flat overall with health recovering, with less impact from strikes than in the previous month, and IT also had a strong month."
He concluded that across the last three months as a whole the economy showed no growth.
The economy would need to contract again by 0.1% in June for there to be an overall decline across the second quarter, according to the statistics body.
But if GDP in June rose by 0.3%, then the economy will have grown over the quarter.
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.”
The latest figures last month revealed the UK's rate of inflation remained the same in May as in April, at 8.7%.
What does it mean for my money?
A healthy economy is one that is growing and not in recession.
Recession occurs if there are two consecutive quarters of GDP falling.
The year is split into four three-month quarters.
The economy showed no growth in the three months to May, which means a recession was avoided.
Recessions are bad news because it usually means jobs will be lost and wages will stall.
It can cause businesses to go into administration or bust too.
This, in turn, means the government gets less tax, which could mean cuts to public services and benefits such as Universal Credit. Tax rates might go up too.
The UK last went into recession in 2020 after the coronavirus pandemic hit, shutting down large parts of the economy.
How to protect your finances
If you're worried about your finances, there are steps you can take to try and keep your cash safe.
For some people, this could mean investing - but this is risky and many don't have spare cash to put in the stock market at the moment.
Having an emergency savings pot is helpful in times of inflation, to help cover any outgoings that might have increased unexpectedly.
You might consider asking for a pay rise at work, but there are no guarantees your company is in a position to offer one.
Be sure to make savings where you can - shop around for better deals on your car and home insurance, as well as broadband and mobile phone.
Save money by going to a cheaper supermarket, shopping for own-brand rather than premium products, and looking out for yellow-sticker bargains.
Make a budget and check your bank statements for any forgotten subscriptions you might be wasting money on.
Be sure to claim any financial support you're entitled to as well - a benefits calculator can help you work out what you might qualify for.
Making extra cash in your spare time can help too, picking up a side hustle or selling your old clothes could give you a boost.
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