Burnham 'casts a shadow over the economy' as Reeves leaves No11 with dismal growth and a fragile future

By JOHN-PAUL FORD ROJAS, DEPUTY BUSINESS EDITOR Andy Burnham will inherit a 'fragile' economy gripped by stagflation fears, experts warned on Thursday after the latest dismal growth figures. Days before Mr Burnham enters Downing Street, the Office for National Statistics (ONS) said gross domestic product (GDP) grew by just 0.1 per cent in May, after shrinking by 0.1 per cent in April. It came as the International Monetary Fund (IMF) delivered a stark warning to the incoming Prime Minister not to put up public spending and instead get the public finances under control. Official figures suggest the economy enjoyed a strong start to the year but has stuttered after Donald Trump's Iran war disrupted supply chains and pushed up costs. Some businesses also point to the ongoing impact of Labour's tax hikes, minimum wage increases and workers' rights policies in holding back growth. And experts point to the risk that Britain suffers a bout of 'stagflation' – the toxic combination of stagnating growth and rising inflation. Latest sluggish growth figures come days before Andy Burnham takes office - and don't match what Rachel Reeves (pictured on Tuesday) has been claiming...  It comes in stark contrast to Chancellor Rachel Reeves's claim in a speech to the City this week to have 'beaten the odds' to deliver a 'strong' economy. Thursday's GDP figures showed that while the huge services sector – ranging from bars and hotels to accountancy and law firms – grew by 0.3 per cent in May, other parts of the economy struggled. Manufacturing grew by just 0.1 per cent and the construction sector shrank by 0.8 per cent. Stuart Morrison, research manager at the British Chambers of Commerce said: 'The latest ONS data shows a fragile economy weighed down by geopolitical tensions and domestic cost pressures.' And Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, said: 'This dishearteningly weak rebound is unlikely to ease anxiety over the UK's economic health.' Mr Thiru said the 'underwhelming' figure highlighted that the UK remained vulnerable given the resumption of hostilities in the Middle East, pushing oil prices higher again. Such an outcome 'would further damage an already frail economy, strengthening stagflation risks'. he added – eroding the new PM's 'headroom' for changing tax or spending plans. 'The imminent change in Prime Minister risks casting a shadow over the UK economy, with heightened uncertainty over future tax policy likely to make consumers and businesses more reluctant to spend and invest,' Mr Thiru said. It came as the IMF's latest report on the UK also stressed that the parlous state of the public finances could tie the new PM's hands. The IMF said that, amid ballooning debt and pressure from bond investors, Mr Burnham's priority must be to stick to plans to bring down borrowing. And in advice unlikely to find favour with Left-wing Labour MPs, it said the government must be 'very selective' when responding to new demands for spending. The IMF acknowledged the pressures posed by the UK's ageing population and rising defence spending commitments but warned against raising taxes even further to meet them. 'With the tax-to-GDP ratio already set to reach historic levels by UK standards, meeting these pressures through tax measures alone would risk amplifying distortions and undermining growth prospects,' it said. The advice from the IMF came a day after Mr Burnham refused to rule out imposing a wealth tax when he comes to power, saying he 'might be having to ask for a little more'. MIDAS SHARE TIPS MIDAS SHARE TIPS: The giant stocks most in danger if the AI tech bubble suddenly bursts... and which are still worth clinging on to MIDAS SHARE TIPS: How to build long-term profits by investing in family-run firms MIDAS SHARE TIPS: Three rejuvenated stocks to put in your trench coat pocket MIDAS SHARE TIPS: Retail giants that could give YOU a Christmas bonus MIDAS SHARE TIPS: Take a bite out of these three firms floating shares on stock market MIDAS SHARE TIPS: Three stocks to help you survive a financial crash MIDAS SHARE TIPS: How to profit from the growing British businesses that will put patriotic pride in your investment portfolio MIDAS SHARE TIPS: How YOU can profit from Trump and Starmer's 'golden age' of nuclear power MIDAS SHARE TIPS: Four crash-proof stocks to survive economic disaster         DM.later('bundle', function(){ DM.has("p-1047", "pictureSwap"); }); FUND AND TRUST IDEAS ECOFIN GLOBAL UTILITIES AND INFRASTRUCTURE: A fund to tap into surging electricity prices WS GUINNESS GLOBAL ENERGY: Rising oil price lifts returns for investors FIDELITY SPECIAL VALUES: Manager seeks to protect income flow in troubled times MURRAY INCOME TRUST: New managers stick with winning formula FORESIGHT ENVIRONMENTAL INFRASTRUCTURE: A fund built to withstand weather risks CAPITAL GEARING: An investment trust that's built to protect investors against rising inflation MURRAY INTERNATIONAL: The trust that has delivered on dividends for 21 years...and counting JUPITER UK DYNAMIC EQUITY: The fund that transforms companies... and then waits for their shares to rise BLACKROCK ENERGY AND RESOURCES INCOME: The trust primed to profit from the future of energy and mining ROCKWOOD STRATEGIC: Raking in big returns from Britain's unloved small firms         DM.later('bundle', function(){ DM.has("p-1068", "pictureSwap"); }); Latest from Business Burnham 'casts a shadow over the economy' as Reeves leaves No11 with dismal growth and a fragile future Big Four accountant PWC fined ANOTHER £3m over botched audit of defence giant Babcock Norway's gain, UK's pain: Labour must not squander Britain's North Sea bounty, says RUTH SUNDERLAND Four UK firms targeted in fresh £10bn bid frenzy as foreign predators scour the UK stock market for bargains Households face fresh pay squeeze as salaries fail to keep pace with inflation Frasers shares slump after it withholds outlook amid Hugo Boss takeover talks SpaceX shares drop below stock market debut price with more than $1trillion wiped off Ocado shares crash to a 13-year low as investors lose patience with its weak tech division Foxtons takes £3m hit from Renters' Rights Act as students rush to end contracts Housebuilder Crest Nicholson slashes guidance after unveiling first-half loss in 'subdued' market MORE HEADLINES