INDUSTRY ANALYSIS
OUTLOOK FOR 2026? LIKELY MORE OF THE SAME
rate to 3.75%. This was a result of inflation falling to 3.2% in November (compared to 3.6% in October), as well as slower economic growth in Q3. Inflation is poised to fall further in the first half of 2026 as the higher levels seen in the H1 of 2025 drop out of the calculation. However, the international economy and political environment remain volatile. ● Climate change affects food prices. ● The UK is tied into a highly damaging Brexit that suppresses trade and makes it sensitive to external shocks. ● Ongoing worldwide political uncertainty seems likely. It is reasonable to expect one or two further base rate cuts in 2026, but we are not moving back to an environment of low interest rates. Decisions made by the Bank of England’s Monetary Policy Committee (MPC) have been finely balanced, with hawkish views holding sway. It may hold interest rates between 3% and 3.5% over the medium term. Supply chain Materials producers and merchants have struggled to pass through historical price increases, and are dealing with higher costs. ● The living wage has increased by 43% in five years. ● Energy costs remain high, adding costs for energy intensive businesses. What to expect in 2026 Commentators expect the UK economy and construction to continue its holding pattern during the year ahead. Constraints limit a significant bounce in supply, with persistent construction employment shortages. ● There was historically low employment in Q3 2025. ● Cost pressures will still be evident as described above. Additional constraints will hold back consumer demand, such as ongoing uncertainty and widespread negative sentiment. But let’s end on a positive note. No crash is expected. Inflation will likely fall, and that means consumers may start to shake off their shackles.
Summing up last year, Tom Hall of Aqua Consultants says the underwhelming economy constrained construction
I
t’s a new year and time to reflect on what has come before. In 2025, negativity and uncertainty held back the UK economy and, by extension, construction. This despite data showing consumers have
messaging, and visible inflation such as supermarket food prices. November’s Budget was unremarkable, with the Chancellor focused on balancing a future rounding error with future cuts, which may or may not happen. A lack of new schemes was evident – 2024’s Budget did the heavy lifting for the new government’s spending priorities and 2025 provided little support to struggling firms. December brought a welcome reduction in the Bank of England’s base
Tom Hall
money to spend after repairing their finances over the last 18 months with higher savings rates. Nevertheless, they are not spending due to uncertainty, negative media
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