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 November paint a similar outlook for construction activity this year and next, with the same averages as were reported last month⁽¹⁾.

The average of new independent forecasts points to UK GDP growth of 1.4% in 2025, moderating slightly to 1.2% 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 September⁽²⁾, following no growth in August (revised down from the previous reported 0.1% rise). Within September’s GDP figures, construction output grew by 0.2%, after a downwardly revised 0.5% decrease in August.

Dr David Crosthwaite, chief economist at BCIS, said: ‘These forecasts reinforce what we’ve been seeing on the ground for some time. The economy is ticking over, but momentum remains weak, and that inevitably filters through to construction workloads. While pockets of demand exist, 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 3.6% in 4Q2025, compared with 4Q2024, before easing to 2.3% throughout 2026.

The 2026 outlook remained unchanged at 2.3% from April to September, while expectations for 4Q2025 have reduced slightly from 3.7% 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.’

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

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