According to a report by the Confederation of British Industry (CBI), factory orders are falling at the fastest pace since September 2020. Meanwhile, S&P Global reported that the UK economy is on course to contract by 0.2 per cent this year, leaving the country on the brink of recession. The report blamed Labour's policies, particularly higher taxes and employment red tape, for derailing the economy.
Labour has been given a ‘brutal reality check’ after the economy slammed into reverse – leaving the country at risk of recession. A report by the Confederation of British Industry found factory orders are falling at the fastest pace since September 2020 during the depths of the Covid-19 pandemic.
Separate figures from S&P Global showed the private sector in decline for the first time in over a year as business faces ‘a perfect storm’ from political chaos at home and conflict in the Middle East. S&P Global said the economy is on course to contract by 0.2 per cent in the second quarter of the year – leaving Britain on the brink of recession.
Analysts said the bleak reports laid bare the true state of the economy after official figures showed output rose by 0.6 per cent in the first quarter. Reality check: Rachel Reeves has hammered households and businesses with higher taxes S&P Global's index of private sector activity has dropped to its lowest in over a year Tory business spokesman Andrew Griffith said business has been left reeling by Labour’s ‘April Armageddon’ of soaring taxes and a fresh wave of employment red tape.
'From the jobs tax and higher business rates to job-destroying legislation and rising energy bills, time and again Labour has shown it is not on the side of business,' he said. Matthew Ryan, head of market strategy at financial services group Ebury, said the figures are ‘a brutal reality check’ after Rachel Reeves hailed previous upbeat data as evidence she has ‘the right economic plan’.
Mr Ryan said the earlier ‘surge in activity was always suspect’ and added: ‘This fleeting optimism now looks like nothing more than a dead cat bounce.
‘Britain's economy is stalling precisely when inflation is set to rise – all the hallmarks of a classic stagflation trap. ‘With the Strait of Hormuz set to remain effectively closed for some time, and the UK jobs market deteriorating fast, the outlook is fairly grim. ‘Compounding the pain is acute political uncertainty, which will only breed further caution at exactly the wrong moment.
’ The CBI said its monthly measure of new orders at British factories now stands at its lowest level since the economy was being strangled by Covid nearly six years ago. The business lobby group called on ministers to take ‘urgent action to reduce industrial energy costs’ and deal with planning delays and ‘regulatory complexity’ to boost investment.
‘Against an increasingly uncertain global backdrop, the conflict in the Middle East is feeding through to higher energy costs and renewed supply chain disruption, adding another layer of challenges for manufacturers, who are already grappling with weak demand,' said Cameron Martin, senior economist at the CBI. S&P Global said its index of activity across the private sector – where 50 is the cut off between growth and decline – tumbled to 48.5 in May from 52.6 in April.
It was the first reading below the 50 threshold since April 2025 and signalled a quarterly contraction of 0.2 per cent.
‘The UK economy is facing a perfect storm, as rising political uncertainty adds to the growing impact from the war in the Middle East,’ said Chris Williamson, chief business economist at S&P Global. ‘Things could well get worse in the coming months. ’ He added: '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.
‘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. ’ DIY INVESTING PLATFORMSAJ BellAJ BellEasy investing and ready-made portfoliosLearn MoreLearn MoreHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasLearn MoreLearn Moreinteractive investorinteractive investorFlat-fee investing from £4.99 per monthLearn MoreLearn MoreFreetradeFreetradeInvesting Isa now free on basic planLearn MoreLearn MoreTrading 212Trading 212Free share dealing and no account feeLearn MoreLearn MoreAffiliate links: If you take out a product This is Money may earn a commission.
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Labour Economy Recession Factory Orders Private Sector S&P Global CBI Taxes Employment Red Tape Higher Taxes April Armageddon War In The Middle East Perfect Storm Conflict In The Middle East
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