The Building Cost Information Service (BCIS) is the leading provider of cost and carbon data to the UK built environment. Over 4,000 subscribing consultants, clients and contractors use BCIS products to control costs, manage budgets, mitigate risk and improve project performance. If you would like to speak with the team call us +44 0330 341 1000, email contactbcis@bcis.co.uk or fill in our demonstration form
Published: 16/10/2025
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.
Slight improvement in near-term growth predictions
Independent economic forecasts published by HM Treasury in October paint a slightly more positive outlook for construction activity over the rest of the year(1).
The average of new independent forecasts points to UK GDP growth of 1.4% in 2025, moderating to 1.2% in 2026 – higher than the average reported for 2025 last month (1.2%), though remaining the same for 2026.
By comparison, GDP averaged closer to 2% growth through most of the 2010s. Since the pandemic, growth has settled at closer to 1% per year, reflecting the UK’s weaker post-COVID recovery.
Source: HM Treasury
The latest ONS estimates show monthly GDP grew by 0.1% in August, following a fall of 0.1% in July (revised down from 0%) and growth of 0.4% in June(2). Within August’s GDP figures, construction output fell by 0.3%, after showing no growth in July (revised down from 0.2%).
Dr David Crosthwaite, chief economist at BCIS, said: ‘The forecasts confirm that while there are signs of marginal improvement, the UK economy remains stuck in a low-growth cycle. The small uplift in 2025 projections is welcome, but it doesn’t signal a strong recovery. For construction, this means firms shouldn’t expect a return to pre-pandemic growth patterns anytime soon and will need to plan pipeline and capacity on the assumption of steady but subdued demand.’
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 creep up
Forecasts suggest CPI inflation will average 3.7% in 4Q2025, compared with 4Q2024, easing to 2.4% throughout 2026.
The 2026 outlook had remained unchanged at 2.3% since April, while expectations for 4Q2025 have increased slightly from 3.6% last month.
Source: HM Treasury
Dr Crosthwaite added: ‘The persistence of inflation above target highlights the ongoing cost pressures impacting the economy. With price growth expected to increase over the next few years, there is little immediate relief on the horizon for construction firms. Materials and labour costs continue to run high, and contractors are unlikely to adjust pricing significantly while these pressures persist.’
He also warned that tight financing conditions are compounding these pressures, with higher borrowing costs continuing to deter investment in new projects. For many firms, particularly those operating in risk-sensitive markets, access to affordable finance remains a key constraint on activity.
He said: ‘The combination of weak growth and stubborn inflation will continue to test project viability, leaving both public and private clients exposed to a persistent gap between delivery costs and available budgets until confidence in the wider economy improves.’
To keep up to date with the latest industry news and insights from BCIS, register for our newsletter here.