Latest economic forecasts

Growth predictions for UK economy edge up to 1% for 2026

Independent economic forecasts received by HM Treasury in July point to a modest improvement in the outlook for UK economic growth in 2026⁽¹⁾.

The average of new independent forecasts indicates UK GDP growth of 1% in 2026, up slightly from 0.9% in June, the first time the forecasts have averaged 1% since February. Expectations for 2027 are unchanged, with growth also forecast at 1%.

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: July 2026}

Dr Crosthwaite, chief economist at BCIS, said: ‘The latest forecasts show a small improvement on last month, but the picture remains one of low growth overall, with little sign of a significant acceleration in activity over the next two years. The outlook has been broadly stable for some time now, and growth expectations remain relatively weak by historic standards.

‘For construction, this is likely to maintain a cautious backdrop for investment and development activity. Clients, funders and developers continue to face uncertainty around financing costs, project viability and wider market conditions, all of which can influence decisions on whether and when projects proceed.’

The forecasts published by the Treasury also suggest CPI inflation will average 3.4% in 4Q2026, down from 3.7% forecast the previous month, before easing to 2.3% annual inflation by the final quarter of 2027, unchanged from June’s forecast.

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

Dr Crosthwaite added: ‘Inflation expectations for this year have eased slightly, but the trajectory into 2027 is unchanged, and inflation remains above the Bank of England’s target throughout the forecast period. For construction, this means cost pressures have not disappeared, particularly in areas such as labour, energy and parts of the materials supply chain.

‘Inflation at these levels can also affect borrowing costs and investor confidence, which in turn influence project funding and development activity. The combination of subdued economic growth and persistent inflation continues to reinforce the need for careful forecasting, risk assessment and value management across the project life cycle.

‘If the government wants construction to play a greater role in supporting economic growth, the industry will need increased confidence around infrastructure pipelines, planning policy and long-term investment priorities. Better sight of future workloads can help businesses invest in skills, technology and capacity, supporting both productivity and long-term sector resilience.’

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^{(1) GOV.UK – Forecasts for the UK economy: July 2026  - here}