Latest economic forecasts

Each month HM Treasury publishes a comparison of independent forecasts for the UK economy, including averages for GDP growth and Consumer Prices Index (CPI) inflation. These forecasts are a useful barometer for construction, helping firms to understand the wider forces shaping demand, costs and investment decisions. 

Growth predictions for UK economy shrink further for 2026

Independent economic forecasts received by HM Treasury in April point to more subdued UK economic growth in 2026⁽¹⁾. 

The average of new independent forecasts indicates UK GDP growth of 0.6% in 2026, increasing to 1.1% in 2027. By comparison, GDP growth averaged closer to 2% through much of the 2010s. Since the pandemic, growth has settled nearer to 1% per year, reflecting the UK’s weaker post-COVID recovery. 

^{Source: HM Treasury – Forecasts for the UK economy: April 2026}

Dr David Crosthwaite, chief economist at BCIS, said: ‘The projected contraction in economic growth is a direct response to the Iran war with the International Monetary Fund’s latest forecast suggesting the conflict will hit the UK hardest of the world’s most advanced economies.  

‘The UK’s energy market structure leaves it particularly vulnerable to price shocks. The risk is there will be a sharp rise in domestic production costs which, alongside higher fuel prices, could begin to erode key growth sectors such as construction. At present, the timeline for recovery remains uncertain and will largely depend on how quickly and effectively a resolution is reached between the US and Iran.’  

A relatively flat economic backdrop suggests developers, housebuilders and clients are likely to remain cautious about new investment. 

Any recovery in workloads is therefore likely to be gradual and uneven across sectors, reinforcing the importance of careful forward planning and cost management. 

The forecasts published by the Treasury also suggest CPI inflation will average 3.6% in 4Q2026, compared with 4Q2025, falling to 2.2% annual inflation in the final quarter of 2027. 

^{Source: HM Treasury – Forecasts for the UK economy: April 2026}

Dr Crosthwaite added: ‘New forecasts continue to indicate a return to higher levels of inflation later this year. It’s likely inflation in material input costs for contractors will follow suit, although much depends on the duration of the conflict and the recovery of regular production and distribution activity.  

‘Contractors may also face additional strain from supply chain disruption and increased transportation costs, which could further compound pricing uncertainty in the near term. In this environment, maintaining flexibility in procurement strategies and closely monitoring cost movements will be critical for firms seeking to manage risk and protect margins.’ 

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^{(1) HM Treasury – Forecasts for the UK economy: a comparison of independent forecasts  - here}