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 soften for 2026

Independent economic forecasts received by HM Treasury in March point to more subdued UK economic growth in 2026⁽¹⁾.

The average of new independent forecasts indicates UK GDP growth of 0.9% in 2026, increasing to 1.3% 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: March 2026}

Dr David Crosthwaite, chief economist at BCIS, said: ‘GDP forecasts released in March were weaker than expected and are likely beginning to reflect the impact of ongoing tensions in the Middle East. With little sign of de-escalation, it appears increasingly likely that conflict will persist at least into the end of the month. Should this continue, it will present further challenges for the UK’s economic recovery.

‘Construction output, a key driver of economic growth, may come under pressure as input costs and interest rates increase. This could hinder the government’s ambitions to accelerate infrastructure investment and housing delivery.’

A relatively flat economic backdrop suggests developers, housebuilders and clients are likely to remain cautious about new investment.

Any recovery in workloads is therefore likely to be gradual and uneven across sectors, reinforcing the importance of careful forward planning and cost management.

The forecasts published by the Treasury also suggest CPI inflation will average 2.6% 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: March 2026}

Dr Crosthwaite added: ‘The latest CPI forecasts suggest inflationary pressures are likely to remain more persistent than previously expected. While the trajectory is still downward from recent peaks, the expected pace of easing is slower, which could have implications for both monetary policy and investment decisions.’

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^{(1) HM Treasury – Forecasts for the UK economy: a comparison of independent forecasts  - here}

^{(2) Office for National Statistics – GDP monthly estimate, UK: January 2026  - here}