The UK’s economy is expected to stall another month as the Iran war continues to choke growth and some industries face slowing output.

Gross domestic product (GDP) is expected to have slipped again by 0.1 per cent in May, according to some economists.

The UK’s growth update, delivered by the Office for National Statistics (ONS) on Thursday, is expected to reveal the ongoing effect of the global turbulence caused by the US and Israel’s war with Iran.

April’s 0.1 per cent dip marked a sharp pullback from growth of 0.3 per cent in March and 0.4 per cent in February and the first contraction since August last year.

That decline was led by a fall in GDP for the services industry – the most dominant in the UK economy – and offsetting growth in the construction and manufacturing industries.

Iran war ‘will have impact at home’

Surging fuel and energy costs were squeezing some businesses and households in April and remained elevated in May, although wholesale prices have come down in more recent weeks.

It prompted Chancellor Rachel Reeves to state that it was “not a war we wanted or joined, but one that will have an impact at home”.

Ministers had warned that the impact of the Iran war on the UK economy could persist for eight months after the conflict comes to an end.

Food industry leaders have cautioned that the Iran war’s impact on supermarket inflation is yet to kick in but could spike prices by as much as 10 per cent later this year.

The recent flare-up in tensions between the US and Iran has sent oil prices back up and quashed hopes of a near-term resolution to the conflict.

‘Sluggish’ economy for May

Pantheon Macroeconomics said it was forecasting another weak performance for the services industry but a more mixed bag across the wider economy, with subsectors like energy supply boosted by higher oil prices.

Its analysts are expecting GDP to have shown no growth in May.

Deutsche Bank said it was expecting GDP to have declined by 0.1 per cent in May in a more downbeat outlook for the economy.

Sanjay Raja, the bank’s chief UK economist, said that services activity remained “sluggish” in May, including information, professional and financial services, and real estate.

But it is not “all bad news” for the economy, he said, adding: “Anecdotally, retailers pointed to a combination of promotions and warmer weather boosting demand for items such as outdoor furniture and fans.”

Raja suggested that some sectors could get a boost this month from England’s progress in the World Cup, with pubs and bars taking a boost from busier trading.

Contribution by PA Media