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 remain steady for the UK economy

Independent economic forecasts received by HM Treasury in December paint a similar outlook for construction activity this year and next⁽¹⁾.

The average of new independent forecasts points to UK GDP growth of 1.4% in 2025, moderating slightly to 1.1% in 2026. By comparison, GDP averaged closer to 2% growth through most 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}

The latest ONS estimates show that monthly GDP fell by 0.1% in October⁽²⁾, following a 0.1% fall in September and no growth in August. Within October’s GDP figures, construction output decreased by 0.6%, after a 0.2% increase in September.

Dr David Crosthwaite, chief economist at BCIS, said: ‘The UK economy continues to tick over, but not at the level needed to catalyse growth through higher construction output. The latest economic forecasts show that decreases in new work and repair and maintenance were to blame for the fall in monthly construction output in October. Pockets of demand exist, but the overall picture is one of slow and uneven growth.’

A flat economic backdrop means developers, housebuilders and clients are likely to remain cautious about new investment. Any upturn in workload will probably be gradual and uneven across sectors, reinforcing the need for careful forward planning and cost management.

Inflationary pressures set to ease slightly

Forecasts suggest CPI inflation will average 3.5% in 4Q2025, compared with 4Q2024, before easing to 2.2% throughout 2026.

The 2026 outlook remained unchanged at 2.3% from April to September, while expectations for 4Q2025 have reduced slightly from 3.6% last month.

^{Source: HM Treasury}

Dr Crosthwaite said: ‘Inflation is moving in the right direction, but that doesn’t mean construction costs will suddenly fall. Costs are still rising, just at a slower pace, and firms shouldn’t expect a quick return to pre-pandemic conditions. The challenge for 2026 will be managing those pressures in a market where clients may start to feel more confident, but margins remain tight. It’s a delicate balance that calls for realistic pricing and strong cost control.’

To keep up to date with the latest industry news and insights from BCIS, register for our newsletter here.

^{(1) GOV.UK – Forecasts for the UK economy: December 2025  - here}

^{(2) Office for National Statistics – GDP monthly estimate, UK: October 2025  - here}