UK business activity drops in May for first time in more than a year

(Sharecast News) - UK business activity fell in May for the first time since April 2025 as political uncertainty at home added to the impact of the war in the Middle East.

The flash S&P Global composite output index fell to a 13-month low of 48.5 from 52.6 in April and versus expectations of 51.6. A reading above 50.0 indicates expansion, while a reading below signals contraction.

The flash services PMI business activity index declined to a 64-month low of 47.9 in May from 52.7 the month before, while the manufacturing output index printed at 52.4, up from 51.8 in April and hitting a three-month high.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "The UK economy is facing a perfect storm, as rising political uncertainty adds to the growing impact from the war in the Middle East. Businesses are reporting falling output, surging inflation, supply shortages and job cuts in May.

"The May PMI data indicate that the economy contracted at a 0.2% quarterly rate, representing a marked contrast to the robust growth seen earlier in the year. The blame lies first and foremost with the war in the Middle East, though companies are also noting that domestic politics are taking an increasing toll, driving uncertainty higher, in turn deterring spending, hiring and investment."

Williamson said things could well get worse in the coming months as there has been some support to manufacturing from precautionary stock building which will inevitably fade once warehouses are full.

"Just as the economy shows signs of sinking into decline, prices are surging higher to herald a marked upturn in inflation in the months ahead as these costs pass through to consumers," he said. "This combination of a faltering economy and spiking price pressures leaves the Bank of England in a major quandary, facing the growing need to hike rates to help contain inflation but thereby adding to recession risks."