Dry January?

Economic Week In Review | Issue 511 | 12 January 2026

UK construction and property

  • Construction administrations | 20 construction companies fell into administration in December, marking the highest rate of collapse since 2022 despite the quietest Q4 in terms of administrations since 2021. A total of 286 construction administrations occurred in 2025, a slight increase from 282 in 2024, but significantly lower than the 363 failures in 2023.
  • Construction activity | S&P Global’s construction PMI for December rose slightly to 40.1, up from 39.4 in November, marking a gradual slowing from October’s low of 44.1. Respondents noted fragile client confidence and low demand, with housing, commercial, and civil engineering sectors all hitting steep lows. However, business optimism reached a five-month high, with over one-third of firms anticipating output growth in 2026—compared to only 20% expecting a decline.
  • Planning permissions for new homes reached a 15-year low in data released at the end of last year. Just 42,000 new homes were approved in Q3 2025, a 31% fall compared to 2024. The Home Builders Federation’s Housing Pipeline report showed that London saw the largest fall, with only 34,000 units approved in the capital in the last 12 months.
  • Infrastructure problems | London’s deputy mayor for housing has warned that efforts to reach the government’s housing target will fall short unless infrastructure is built. He called on ministers to back the Bakerloo Line extension and the proposed West London Orbital, as well as to ensure progress on the DLR extension, which was supported in the Budget.

Global economy

  • Global tax deal |Nearly 150 countries have agreed to a revised OECD framework aimed at enforcing a 15% global minimum corporate tax on large multinational firms—a pact originally set in 2021. The agreement introduced a “side-by-side” system, allowing jurisdictions to opt out if they maintain equivalent domestic tax regimes.
  • Growth | The UN’s World Economic Situation and Prospects 2026 report projects global GDP growth of 2.7% in 2026, slightly down from 2.8% in 2025, and below the pre-pandemic average of 3.2%. Key risks and constraints to growth include rising US tariffs, though countries remain resilient to the tariff shocks, subdued investment, limited fiscal space, high debt levels, and borrowing costs, all of which are weighing on global activity.
  • Mercosur deal | European Union member states have backed the biggest ever free trade agreement with a group of Latin American countries, ending 25 years of negotiations. The European Parliament must approve the deal to bring it into force, with the President of the European Commission expected to travel to Paraguay on Monday to formally sign the agreement.

UK economy

  • Worker reforms | A government impact assessment has shown the impact of Labour’s Employment Rights Act, a key pillar of the government’s Plan to Make Work Pay, is now estimated to cost companies £1bn a year after major concessions to the bill were made by ministers. Prior to the concessions, analysis found that implementing the party’s measures to bolster workers’ rights would cost firms up to £5bn a year.
  • Hiring confidence | A study by KPMG and the Recruitment and Employment Confederation found that businesses confidence weakened at the end of 2025 and that many firms had paused hiring or were preferring temporary contracts.
  • FTSE 100 | The FTSE 100 index climbed above 10,000 points for the first time, on the first trading day of the year. The chancellor said the FTSE’s break-through was “a vote of confidence in Britain’s economy and a strong start to 2026.”

Materials and commodities

  • Building materials | The Builders Merchant Federation (BMF) downgraded its annual sales growth projection for 2025 from 2.5% to 1.4%, citing a sharp slowdown in the second half of the year. It also lowered its 2026 growth forecasts from 3.1% to 2.3%. The forecast pointed to subdued GDP growth of 0.1%, falling consumer confidence, and a housing market slowdown as key headwinds.
  • Aluminium | The EU is facing a growing risk of an aluminium shortage as scrap is sold to overseas buyers who offer higher prices compared to EU recyclers. This could undermine EU’s circular economy goals and increase the reliance on primary aluminium imports, which have a higher carbon footprint.
  • Copper prices rose to a new record high, passing $13,000 a ton for the first time at the London Metal Exchange. This increase was driven by its use in the energy and AI sectors, as well as an expected shortage of the metal. However, demand has fallen in other sectors as producers have failed to pass costs on.
  • Mining merger | Rio Tinto and Glencore have been engaged in preliminary discussions to merge, in a bid to help Glencore use more of its copper deposits. However, Rio Tinto’s investors are warning that the miner should not pay “over the odds” for Glencore.

Environment

  • Climate records | According to Met Office provisional figures, 2025 has broken historic climate records, being both the warmest and sunniest year on record for the UK. Four of the last five years are now among the top five warmest since records began in 1884.
  • Climate bodies | President Trump has withdrawn the US from 66 international organizations, with nearly half of the bodies being UN-related, including the Framework Convention on Climate Change – a treaty that underpins all international efforts to combat global warming. European leaders have criticized this latest decision, warning it would weaken global cooperation.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 10,124.60 1.74 22.74
FTSE 250 23,036.80 2.80 16.74
Nikkei 51,939.89 0.21 32.53
CSI 300 4,758.92 0.87 27.50
S&P 500 6,966.28 1.57 19.55
Nasdaq 23,671.35 1.88 23.54
CAC 40 8,362.09 2.04 12.53
Dax 25,261.64 2.94 24.97
$ per £ 1.3411 -0.49 9.81
€ per £ 1.1527 0.39 -3.37
Gold £/oz 3,364.54 4.53 52.67
Brent Oil $/barrel 63.34 4.26 -20.59

Weekly Summary

The industry and the economy seem to be entering 2026 in a slightly downbeat mood: the materials market is slow, the Construction Products Association’s forecast has been downgraded and employment confidence is low. But there continues to be pressure from major projects, supported by government policy and a real need to upgrade and expand infrastructure.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst
Kishan Patel
Kishan Patel,
Research Analyst

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