Independent economic forecasts received by HM Treasury in June point to a broadly unchanged outlook for UK economic growth in 2026.
The average of new independent forecasts indicates UK GDP growth of 0.9% in 2026, unchanged from the previous month’s forecast. Expectations for 2027 have eased slightly, with growth forecast at 1.0%, down from 1.1% in May.
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.
Dr Crosthwaite, chief economist at BCIS, said: “The latest forecasts suggest the UK economy remains in a low-growth environment, with little sign of a significant acceleration in activity over the next two years. While the outlook has stabilised compared with earlier forecasts, 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 3.7% in 4Q2026, compared with 4Q2025, before easing to 2.3% annual inflation by the final quarter of 2027.
Dr Crosthwaite added: “Although inflation is expected to continue moderating over the forecast period, it remains above the Bank of England’s target. 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 certainty around infrastructure pipelines, planning policy and long-term investment priorities. Greater confidence in future workloads can help businesses invest in skills, technology and capacity, supporting both productivity and long-term sector resilience.”
