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The UK economy has beaten analysts’ expectations by growing 0.4 per cent in May, double the expected 0.2 per cent figure, according to new ONS figures. This comes as welcome news after April’s figures showed no growth in the economy, with the blame pinned on weather stymieing output.

A combination of severe rainfall in April and May being the warmest since records began is mentioned by the ONS as a factor in these figures. However, data released earlier this week by the British Retail Consortium found that June’s inclement weather led to retail sales falling, so economists and business leaders will be watching to see if this is reflected in next month’s GDP figures.

ONS director of economic statistics, Liz McKeown, says: “Across the past three months as a whole, the economy grew at its quickest pace for over two years.” Despite not being in power in May, Labour has reiterated its election pledge of economic growth being “our national mission”. Rachel Reeves says: “A decade of national renewal has begun and we are just getting started.”

Digging into the numbers, the ONS data reveals that, after a fall of 1.1 per cent in April, construction output grew by 1.9 per cent in May. The share price of UK housebuilding companies rose the day after the government was elected due to its pledge to house planning reform. Services output was up 0.3 per cent, the same level as the previous month, while production was up 0.2 per cent, a turnaround from a fall of 0.9 per cent in April.

The figures come three weeks before the Bank of England delivers its latest verdict on interest rates and the financial markets are putting the odds of a reduction at 50 per cent. This despite a member of the Bank’s Monetary Policy Committee, which sets the UK’s main interest rate, saying that he would rather hold rates earlier this week.

One way the new government is hoping to boost economic growth is by getting more people back into work. ONS figures from last month show that 11 million people, or a quarter of the working-age population, do not currently have a job. The Work and Pensions Secretary, Liz Kendall, says that rising levels of economic inactivity are unacceptable and that immediate action must be taken.

Labour’s proposed measures include merging the National Careers Service and Jobcentre Plus, and empowering local mayors and councils to assist “economically inactive” people who are not looking for, or available to, work.

The party also detailed its youth guarantee in its pre-election manifesto, pledging to give “access to training, an apprenticeship or support to find work for all 18- to 21-year-olds”. While the Tories have said Labour needs to “wake up” about the costs of these reforms, the benefits to the economy seem clear.

Business Question

Guess the year

• Sky TV and BSB merge to become BSkyB
• Vodafone Group is formed
• Aldi opens its first UK store
• Fashion-based business Polly Peck enters administration
• The UK enters recession

The answer can be found at the bottom of the page.

Business in Brief

Everything you need to know

1. Regulators have approved the biggest overhaul of rules for London-listed companies in three decades as the UK attempts to revive its capital markets, which have been pummelled by international competition and an outflow of investment. The new listing rules will hand more power to company bosses to make decisions without shareholder votes and give companies more flexibility. The Financial Conduct Authority has warned that the new rules will mean there is a higher risk of investors losing money but said they would “better reflect the risk appetite the economy needs to achieve growth”. You can read more here.

2. The British Business Bank has found that the UK has overtaken India as the world’s third-largest venture capital market, despite an industry slump in which investment and deal numbers dropped markedly last year. Venture investment declined by 48 per cent to £8.80bn in 2023 in the UK compared with the previous year, while the number of deals fell by 25 per cent to 2,152. You can read more here.

3. The UK is set to lose the most millionaires of any country by 2028, according to an analysis of global wealth trends by Swiss bank UBS. The report projected that the number of dollar millionaires in the country would fall 17 per cent from 3.062 million in 2023 to 2.542 million in 2028. You can read more here.

4. A consortium led by British tycoon Mike Jatania is nearing a deal to buy struggling UK cosmetics retailer The Body Shop out of administration, according to Bloomberg. The consortium also includes Charles Denton, who was previously chief executive officer of fragrance and beauty brands Molton Brown and Erno Laszlo. You can read more here.

5. Eurozone wage growth picked up last month, prompting speculation from economists that the European Central Bank could struggle to cut interest rates as much as investors expect. Indeed’s wage tracker showed salaries for jobs advertised rose 4.2 per cent in the year to June, accelerating to the fastest pace for a year, after hovering around 3.5 per cent since the start of 2024. You can read more here.

Business Quotes

Inspiration from leaders

“We live in a society obsessed with public opinion. But leadership has never been about popularity.”
– Marco Rubio

Business Thinker

Ideas on the future of business and leadership

1. ? UK soda tax slashes childrens’ sugar intake ?

2. ❓ AI’s $600bn question ❓

3. ? Brompton boss says decision to shun private equity helped weather downturn ?

And finally…

Ollie Watkins scored a stunning late winner in England’s Euro 2024 semi-final match against the Netherlands last night. The videos of celebrating fans are a sight to behold (RIP all that flung beer).

The England goal scorer’s backstory is an inspiring one that was summed up perfectly by our Business Leader Expert Jake Humphrey on LinkedIn. He recently had him as a guest on his High Performance podcast.

The answer to today’s Business Question is 1990.