The United Kingdom’s economy shrunk for the second month in May, with gross domestic product falling by 0.1%. While many economists expected the economy to grow in May, the country had a hard time navigating global economic instability.

“The lack of momentum in the UK economy indicated by these sluggish figures means that an August interest rate cut currently looks inevitable, despite the recent spike in inflation,” said Suren Thiru, economics director at accountancy body Institute of Chartered Accountants in England and Wales, per Reuters.

Ever since the Labour government took power in July 2024, economic growth has been a priority. Prime Minister Keir Starmer’s has had a hard time driving economic growth, with a tax hike on employers and a trade war with the United States stifling growth. The lingering threat of tariffs from the United States has brewed uncertainty in UK markets, especially as the US is the largest export destination for goods flowing out of the UK. The beginning of the year saw increased exports, as many sought to get ahead of the tariffs originally slated for April and subsequently delayed.

“The second straight decline in monthly real GDP in May will increase concerns that the government’s growth plan has been derailed by external and domestic shocks,” said Raj Badiani, economics director, Europe, at S&P Global Market Intelligence, per Reuters.

The first quarter of 2025 saw strong growth in the economy, but the sudden downturn reflects how US tariffs have weighed on the UK’s economic outlook. After April saw the steepest monthly decline in GDP since October 2023, the International Monetary Fund reduced the UK’s predicted growth from 1.6% to 1.1%.

Industry is also struggling considering economic uncertainties, with output declining 0.9% in May after dropping 0.6% in April, according to the Wall Street Journal. The job market is also weakening, with payrolls falling by 109,000 in May, the largest drop since the onset of the pandemic in 2020.

“Risks and uncertainty associated with geopolitical tensions, global fragmentation of trade and financial markets and pressure on sovereign debt markets are still elevated,” Governor of the Bank of England Andrew Bailey said, per the WSJ.

Of the credit managers with business in the United Kingdom, 93% are established and 7% are new customers. According to FCIB’s Credit and Collections Survey, 43% of these customers are granted 31-60 day terms, 36% are on 1-30 day terms and 7% are on 61-90 day terms. Another 14% do not extend credit to customers in the United Kingdom.

On average, customers are nine days beyond terms, with delays largely being attributed to billing disputes (64%), supply chain issues (36%) and customer payment policy (27%).

“Establish good rapport with your customers,” one respondent wrote. “Letters of credit are recommended if you are extending a larger line of credit.” “Do your due diligence on your customer, the five C’s of credit need to be fully vetted,” another respondent wrote. “Look for any news or reviews on the customers.”