Better conditions emerging

Economic Week In Review | Issue 513 | 26 January 2026

UK construction and property

  • Project starts fell 20% in 2025, according to Glenigan. Despite the overall decline, non-residential sectors performed strongly, with office starts increasing by 32% in 2025 and industrial starts rising by 31%. The analyst says that better conditions are starting to emerge, but warned that currently, “issues that, under normal circumstances, would be unremarkable can have an immediate impact on confidence and activity.”
  • Construction insolvencies | Data from the ONS showed that construction sector insolvencies fell below 300 in November 2025, marking an improvement on both the previous month and the same period last year. In November, 158 specialist contractors, 123 building contractors, and 16 civil engineering firms went under, with conditions in the construction sector still a challenge, despite the easing insolvency figures.
  • Warm Homes Plan | The government unveiled new measures as part of its Warm Homes Plan, focusing on improving professional standards in the retrofit sector and expanding the low-carbon heating workforce. Changes include more funding for heat pump training, as well as introducing low-carbon heating and solar targets with an ambitious deployment goal of over 450,000 heat pump installations per year and 3 million rooftop solar panels by 2029.

Global economy

  • Global growth |The IMF has raised its global growth outlook for 2026. The AI investment boom, especially in the US, has boosted asset values and productivity expectations, while trade adjustments and rerouted supply chains have made the global economy more resilient to US tariff disruptions. Global GDP growth in 2026 is forecast to be 3.3%, up 0.2% from its last estimate in October, with 2027 growth remaining unchanged at 3.2%.
  • Tariffs |A study by the Kiel Institute for the World Economy – an economic think tank based in Germany – showed that last year, after examining more than 25 million shipment records of goods imported to the US, foreign importers absorbed 4% of the $200 billion in tariff payments, with the remaining 96% passed on to US importers and consumers.
  • Europe-US deal | The European Parliament has suspended the approval of a key US trade deal, which was agreed upon in July, in protest against President Donald Trump’s demand to take over Greenland.

UK economy

  • UK growth | The IMF expects the UK economy to grow more slowly than the average of other advanced economies over the next two years. The IMF forecasts GDP growth of 1.3% in 2026 and 1.5% in 2027.
  • Wage growth has slowed to 4.5% between September and November, down from 4.6% in the previous period. Wage growth slowing is seen as a positive for inflation control by economists and the Bank of England.
  • Unemployment | Unemployment levels reached the highest level in nearly five years, with the overall unemployment rate at 5.1%. Youth unemployment (aged 16-24) remained high at 15.9%, near a 10-year peak. The number of people on company payrolls fell by 135,000 over the three months to November, with a particular decline in retail and hospitality, despite the run-up to Christmas.
  • Inflation | Consumer price inflation rose to 3.4% in the year to December, up from 3.2% in November, the first rise in five months. Rising prices were driven partly by higher tobacco prices and airfares, according to the ONS. However, analysts do not think it marks the start of a longer upward trend, with the rise associated with temporary and seasonal factors.
  • Borrowing |Public sector net borrowing for December stood at £11.58 billion, beating a forecast of £13 billion expected by economists. Public sector borrowing is down 7.1% from a year earlier, with the lower level of borrowing supported by robust tax revenues, with receipts rising 8.9% year-on-year in December. Currently, Britain has borrowed £140.4 billion over the first nine months of the 2025/26 financial year, similar to the same period last year.

Materials and commodities

  • CBAM imports |Iron and steel imports into the EU have accounted for 98% of CBAM goods entering the bloc between 1st and 6th The main countries of origin of CBAM-covered imports included Turkey, China, India, Canada, Taiwan, and Vietnam, while the top importing member states were Belgium, Spain, Romania, the Netherlands, France, and Germany.
  • Steel tariffs | The UK is expected to reduce the amount of steel it allows in tariff-free, with new quotas expected to be announced in April for implementation in July. There is a global glut of steel, with exports from China reaching an all-time high in December. The UK government currently has control over British Steel and Specialty Steelworks, so additional safeguards are particularly in their interest.
  • Copper | Goldman Sachs Research has increased its forecast for copper prices for the first half of this year but expects prices to fall later in the year with greater clarity on U.S. tariffs on refined copper.
  • US Gold | The price of gold in the US climbed above $5,000 an ounce for the first time as investors increasingly look for a safe investment amidst increasingly turbulent politics. The move came as President Trump threatened 100% tariffs on Canada if it “makes a deal with China,” and a shooting by federal agents in Minneapolis encouraged Democrats to threaten funding of the Department of Homeland Security, which could lead to another government shutdown.

Environment

  • Green tech |According to a European Commission draft proposal, the EU is preparing new legislation that will require governments to purchase EU-made green technologies in an effort to strengthen Europe’s industrial base and reduce reliance on Chinese imports.
  • Climate resilience |A major new EU-commissioned study finds that the EU, its Member States, and the private sector must collectively invest around €70 billion every year until 2050 to adapt to intensifying climate impacts. The breakdown of annual investment needed includes €30 billion in infrastructure, €21 billion in ecosystems, and €12 billion in food security. France, Italy, Germany, and Spain need the largest investment, with higher needs stemming from larger population sizes, geographic areas, and exposure to climate hazards.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 10,143.44 -0.90 19.30
FTSE 250 23,317.53 1.08 13.64
Nikkei 53,846.87 -0.17 34.85
CSI 300 4,702.50 -0.62 22.69
S&P 500 6,915.61 -0.35 13.35
Nasdaq 23,501.24 -0.06 17.78
CAC 40 8,143.05 -1.40 2.72
Dax 24,900.71 -1.57 16.39
$ per £ 1.3588 1.55 8.77
€ per £ 1.1544 0.07 -2.85
Gold £/oz 3,656.18 6.43 64.73
Brent Oil $/barrel 65.07 1.47 -16.09

Weekly Summary

Despite volatile politics and ongoing tariff discussions, the International Monetary Fund has upgraded its outlook for global growth and lowered its view for global inflation; yet it highlights that risks remain on the horizon. The IMF states that AI has helped growth recently, with its “surging investment related to technology,” and raised concerns that if forecasts for AI growth are too optimistic, the market could correct abruptly.

Forecasts for growth in the UK have remained unchanged this year, but the IMF expects inflation to fall to the 2% target by the end of this year as a weaker labour market caps wage growth.

Glenigan’s comment, “issues that, under normal circumstances, would be unremarkable can have an immediate impact on confidence and activity,” serves as a keen reminder to track the drivers of the construction market in order to understand their significance.

Author contact

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

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