Experts believe the economy remains on course to deliver 0.2 per cent growth across the second quarter overall

Britain's economy grew slightly in May after shrinking the month before, according to new figures from the Office for National Statistics (ONS).

The economy expanded by 0.1 per cent during the month, recovering from a 0.1 per cent fall in April.

The figures are the last major update on the economy before Andy Burnham is expected to become Prime Minister next week, with Chancellor Rachel Reeves widely tipped to lose her job.

The small increase was driven by the services sector, which is the biggest part of the UK economy. Services output rose by 0.3 per cent in May.

However, growth was held back by weaker results elsewhere. Production fell by 0.5 per cent, while construction dropped by 0.8 per cent.

Liz McKeown, the ONS director of economic statistics, said: "While all three main sectors grew over the three months, the slight growth in GDP in May was driven by services alone, with production and construction both falling back."

The figures come as businesses continue to deal with global uncertainty, including the conflict involving the US, Israel and Iran.

Higher fuel and energy prices have also continued to put pressure on businesses and households, although wholesale energy prices have eased in recent weeks.

Chancellor Rachel Reeves said: "It is not a war we wanted or joined, but one that will have an impact at home."

A Treasury spokesperson said: "We have the right economic plan which has put the UK in a much stronger position than two years ago with the fastest growth in the G7 in the first quarter and the OECD (Organisation for Economic Co-operation and Development) agreeing that we have restored stability.

"We’re forecast to be the fastest growing European G7 economy this year and next, inflation is steady, and for the first time since 2004, we are forecast to borrow less this year than the G7 average."

Joe Nellis, emeritus professor and economic adviser at MHA, said the strong growth seen earlier this year now feels like "a distant memory" as tensions in the Middle East continue to weigh on the economy.

He said households have become increasingly cautious while businesses continue adjusting to higher employment costs, with many firms delaying investment until the economic outlook becomes clearer.

The incoming Prime Minister Andy Burnham inherits a challenging economic landscape as he prepares to take office.

Reports indicate Shabana Mahmood is set to be appointed as Chancellor, a choice that suggests Mr Burnham recognises the scale of the task ahead.

Professor Nellis warned that the selection of a new Chancellor represents a crucial signal about the direction of the new administration.

"A spendthrift choice would inevitably unsettle the markets," he said, adding that with borrowing costs already elevated, any further increase would render the Treasury's fiscal position untenable.

Mr Burnham has pledged to maintain the current fiscal rules, making stronger economic growth essential to create room for spending priorities without raising taxes further.

Professor Nellis said policies that boost business confidence, encourage investment and improve productivity will become increasingly important as the new leadership seeks to make an early impact.

Suren Thiru, ICAEW Chief Economist, described the May figures as a "dishearteningly weak rebound" that is unlikely to calm concerns about the nation's economic health.

He warned that the small uptick in May probably failed to prevent overall growth stagnating across the second quarter, with high energy costs likely to have choked off activity in June despite a boost from the World Cup.

Ms Thiru cautioned that Britain remains vulnerable to any prolonged escalation of US-Iran hostilities, noting that a sustained rise in oil prices would further harm an already fragile economy while strengthening stagflation risks.

The looming change of Prime Minister also poses risks, he added, with uncertainty over future tax policy likely to make both consumers and businesses more hesitant to spend and invest.

Despite the tepid May figures, analysts at Pantheon Macroeconomics believe the economy remains on course to deliver 0.2 per cent growth across the second quarter overall.