The UK economy returned to growth in May, expanding by 0.1 per cent after contracting the previous month, handing Andy Burnham the thinnest of economic cushions as he prepares to enter Downing Street next week.
The monthly figure, published by the Office for National Statistics, was in line with City forecasts. On the more reliable three-monthly measure, gross domestic product rose by 0.7 per cent, ahead of projections of 0.5 per cent but slowing from 0.8 per cent in the previous three-month period. The economy expanded by 0.3 per cent in March.
For small business owners, the detail matters more than the headline. The growth that does exist is being generated almost entirely by services, the sector in which most of Britain’s SMEs operate. Services output rose by 0.3 per cent in May, rebounding from a 0.1 per cent fall in April, with information and communications technology, science and research, and professional services among the best performers.
The picture elsewhere is bleaker. Output in production contracted by 0.5 per cent in May and construction fell by 0.8 per cent, Liz McKeown, the director of economic statistics at the ONS, said. For builders, manufacturers and the supply chains of smaller firms that depend on them, the second quarter has offered little comfort.
The timing is awkward for the incoming prime minister. The economy outperformed at the start of the year, registering quarterly growth of 0.6 per cent, but has slowed sharply since, hit by the rising energy prices that have already pushed up costs for firms across the country. As our coverage of March’s jump in inflation to 3.3 per cent set out, fuel and energy bills are squeezing SME margins in ways that are hard to hedge and harder to pass on.
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