According to official figures, Britain's economy shrank surprisingly for a second consecutive month in May, highlighting concerns about momentum heading into the second half of the year in an increasingly unpredictable global environment.

The Office for National Statistics said that the gross domestic product fell by 0.1 percent following a 0.3 percent loss in April.

The majority of the economists predicted that the GDP would increase by 0.1 percent from April's level. 

Although there was some improvement in the services sector, overall output was driven down by reductions in construction and industrial output.

The figure casts doubt on predictions that the GDP expanded in 2025's second quarter following a spike in the first quarter.

In the first quarter of 2025, Britain's economy grew at a faster rate than the other mature economies in the Group of Seven. The Bank of England increased its prediction for full-year growth to one percent in May.

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However, a large portion of the early 2025 rise was probably due to manufacturers' haste to avoid rising U.S. import tariffs and the expiration of a tax benefit for some house purchases in April, which stimulated the industry prior to the deadline.

 

According to the BoE, the GDP expanded by roughly 0.25 percent during the second quarter of 2025. The ONS stated that June's monthly data would have to show at least a flat reading in order to achieve any gain for the quarter.

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Nonetheless, during Friday's early European session, the EUR/GBP cross trades in positive territory at 0.8615. Following the release of UK growth data, the GBP declines slightly vs the EUR. Investors will keep a careful eye on headlines regarding US-EU tariff policy in search of new stimuli.

In the meantime, May saw a 0.9 percent MoM decline in industrial production, down from -0.6 percent in April. The market consensus of zero percent was exceeded by this reading. Some sellers are drawn to the GBP in response to the negative UK economic statistics.

Since the EU is the US's biggest trading partner, traders will be keenly watching developments regarding the US-EU tariff strategy. Meanwhile, the EUR's value relative to the GBP may be impacted by the uncertainties surrounding the EU-US trade agreement.