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 for UK economy increase to almost 1% for 2026

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

The average of new independent forecasts indicates UK GDP growth of 0.9% (up from 0.6% in April), increasing to 1.1% in 2027.

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: April 2026}

Dr David Crosthwaite, chief economist at BCIS, said: ‘While growth expectations for 2026 have improved slightly, the wider outlook remains relatively subdued by historic standards. For construction, that is likely to reinforce a cautious investment environment where developers, clients and funders remain highly sensitive to financing costs, project viability and wider economic uncertainty.

‘Weak GDP growth does not necessarily create a low-cost operating environment either. The industry is continuing to manage pricing volatility across labour costs, energy and materials, while geopolitical instability and supply chain risks still have the potential to create further inflationary pressure. For cost planners and project teams, this increases the importance of robust forecasting, scenario modelling and risk management when making longer-term investment and procurement decisions.’

The forecasts published by the Treasury also suggest CPI inflation will average 3.6% in 4Q2026, compared with 4Q2025, falling to 2.1% annual inflation in the final quarter of 2027.

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

Dr Crosthwaite added: ‘If the government wants construction to play a greater role in supporting economic growth, the industry will need increased certainty around infrastructure pipelines, planning policy and long-term investment priorities. Delayed decision making and stop-start project delivery can weaken confidence across the supply chain at a time when market conditions are already fragile.

‘The current environment also increases the importance of careful project selection and value management. In lower-growth conditions, clients are likely to place greater emphasis on affordability, programme certainty and whole life value, particularly as pressure on public finances and borrowing costs continues to shape investment decisions across both the public and private sectors.’

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