Spring Statement 2026: growth forecasts tempered by inflation risk for construction

The 2026 Spring Statement is unlikely to strengthen confidence in the construction sector as escalating tensions in the Middle East threaten to influence cost planning and investment decisions, BCIS has said.

In the Statement, the Chancellor confirmed the Office for Budget Responsibility (OBR) had downgraded its GDP growth forecast for 2026 from 1.4% to 1.1%.

Growth in 2027 and 2028 has been revised up to 1.6% from 1.5% in November’s forecast and is expected to remain at that level until 2030, though these assumptions are based on information available prior to the US-Israel strikes on Iran.

BCIS data services director, Karl Horton, said the outlook does little to offset industry concerns about geopolitical risk and its potential effect on costs.

‘Against the backdrop of escalating conflict in Iran, restoring confidence through the Spring Statement was always going to be challenging. Much of the current uncertainty affecting markets lies beyond domestic policy control, yet uncertainty remains a significant constraint on investment,’ he said.

‘While it’s too early to draw firm conclusions, a spike in energy prices, such as the increases reported in the oil and gas markets this week, could see contractors and subcontractors paying more for transport and materials. This would place upward pressure on tender prices and could constrain project viability or delay investment decisions.’

Energy markets reacted sharply this week after natural gas and Brent crude oil prices rose in response to disrupted exporter facilities and shipping through the Strait of Hormuz, a key route for global oil and gas supplies.

The OBR’s forecast closed before the recent escalation in the Middle East. Horton noted that assumptions on growth, inflation and borrowing may not yet reflect the latest developments as a result.

He added that prolonged instability could also affect public spending plans.

‘For now, the government’s housing and infrastructure commitments remain in place but scope for additional, fiscal support or rapid delivery seems restricted. Any deterioration in the growth outlook, or sustained increase in energy prices, could quickly place pressure on spending plans, and reduce the likelihood of a rapid uplift in construction output.’

Ahead of the Statement, BCIS highlighted the importance of policy stability and clear pipeline visibility for the sector.

BCIS chief economist, Dr David Crosthwaite, said: ‘Given it is highly unlikely the government will reverse its tax policies in the Statement to reduce business costs, the focus must shift to restoring pipeline visibility and stimulating real demand.

‘Get those right and investment should follow. Without them, confidence may falter and construction output and wider growth will likely remain subdued.’

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