Charting a course

Economic Week In Review | Issue 514 | 2 February 2026

UK construction and property

  • Construction growth forecasts | Construction output is expected to grow by 1.7% in 2026 amid ongoing geopolitical uncertainty, high costs, increased taxes, and the skills crisis, according to the Construction Products Association. This represents a significant downgrade compared to its 2.8% forecast last autumn.
  • National Wealth Fund | The National Wealth Fund has set out a five-year plan aimed at mobilizing more than £100 billion of investment into UK infrastructure, industry, and supply chains by 2030/31 with the help of private finance. The strategy outlines three priorities: backing technology that reduces emissions and lowers energy bills; delivering more regional investment; and strengthening critical supply chains such as green steel, defence, and critical minerals.
  • Office leasing |2025 recorded the highest level of office leasing activity in the Southeast and Greater London since 2019, according to Knight Frank, reported by Green Street News. Office take-up reached 3.37m sq. ft in 2025, a 7% year-on-year increase and 8% above the five-year average. It was also the highest number of individual leasing deals in a decade, with 80% of deals for Grade A space.
  • Financial distress | A new report from insolvency specialists Begbies Taylor shows that the number of construction companies in critical distress surged in Q4 2023. Slowing projects and subdued client demand, along with weak economic confidence and rising cost pressures, have put increasing pressure on firms.

Global economy

  • EU-India trade deal | The EU has finalised a landmark free trade agreement with India aimed at deepening strategic and economic ties. Under the agreement, the EU aims to double goods exported to India by 2032 by cutting tariffs on approximately 96% of EU exports to the country, saving around €4 billion a year in duties. The deal must be ratified by the European Council and European Parliament with hopes to implement the agreement from January 2027.
  • Eurozone | The Eurozone economy grew 1.5% in 2025 outperforming forecasts picking up pace for a second year running. Accelerating growth in Germany, Spain and Italy, to a lesser extent, made up for slow growth in France. Economists see reasons for cautious optimism in 2026 with expected rise in industrial production expected to benefit from defence investments and German infrastructure spending in particular.
  • Fed rate |The US Federal Reserve has voted to hold interest rates with lending rates remaining between 3.5% to 3.75%. Concerns about a deteriorating jobs market have eased in recent weeks but inflation remains above the Fed’s 25 target. The holding of rates paves the way for cuts later this year.

UK economy

  • Investment | The final three months of 2025 saw UK investment volume hit a record £21.6bn according to a report by Lambert Smith Hampton (LSH). The record-breaking figure reflected the strongest ever quarter on quarter rebound in volume, jumping 145% from Q3 with volumes expected to rise further in 2026, from £48bn to £55bn.
  • Business confidence rose to an eight-month high, suggesting that the economy is gaining momentum. The index by the Institute of Directors rose to minus 48% from minus 66%. Improvements were seen in expectations for investment, hiring, and sales.
  • Rates | The Bank of England is expected to keep rates on hold this week, having to balance a strengthening economy with a rising unemployment figure that has nearly reached a five-year high.

Materials and commodities

  • Oil | Venezuela’s government has approved a new bill allowing private companies to invest in and operate parts of its oil industry. The move authorizes U.S. firms to buy, sell, transport, store, and refine Venezuelan crude oil, but does not lift existing U.S. sanctions on production.
  • Steel | Ministers are considering changing the quota system that allows a certain quantity of steel to be imported before imposing a 25% levy. The development comes at a time when Chinese steel exports hit another all-time high in December, while other producers such as Vietnam, Korea, and Turkey are also trying to find customers.
  • Core construction materials | The Mineral Products Association (MPA) reported that demand for UK construction materials remains at record lows, with a fourth consecutive year of decline. Concrete demand fell by 9.9% in 2025. The MPA stated that the fall reflected a chronic lack of new work.
  • Material Supply | The CLC’s Material Supply Chain Group has warned that, in the current market, the supply of materials often exceeds demand (especially for brick manufacturers who invested based on housing targets). Continued subdued demand could encourage manufacturers to reassess production volumes, which will cause problems if demand increases.
  • Exchange rates | The US dollar has dropped to its lowest level in four years, falling around 3% in a week against a basket of currencies, including the euro and the pound. Analysts describe policy unpredictability—rapid shifts, escalations, and reversals—as a key factor damaging investor confidence.

Environment

  • Wind power | A coalition of European nations has signed a major clean-energy pact committing to deliver 100 GW of new offshore wind power through large-scale cross-border projects. The new pledge forms part of a wider North Sea Region goal of 300 GW of offshore wind capacity by 2050.
  • Carbon markets | Analysts have raised their forecasts for EU carbon prices for 2026 and 2027, largely influenced by Europe’s gas price spikes, which jumped 40% this year due to low gas storage levels and freezing US temperatures disrupting LNG exports, as well as tighter future ETS supply due to the phasing out of free allowances. EU allowances are forecasted to average 92.95 euros per metric ton in 2026 and 107.29 euros in 2027, up a little from the forecasts made in October.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 10,223.54 0.79 19.27
FTSE 250 23,253.36 -0.28 10.99
Nikkei 53,322.85 -0.97 34.75
CSI 300 4,706.34 0.08 23.30
S&P 500 6,939.03 0.34 14.87
Nasdaq 23,461.82 -0.17 19.54
CAC 40 8,126.53 -0.20 2.22
Dax 24,538.81 -1.45 12.92
$ per £ 1.3727 1.02 10.30
€ per £ 1.1548 0.03 -3.50
Gold £/oz 3,576.09 -2.19 58.33
Brent Oil $/barrel 70.69 8.64 -7.91

Weekly Summary

It’s positive that the Construction Products Association’s (CPA) latest forecast for construction suggests more work in 2026 than in 2025, but the downgrade in its forecast is concerning, especially as the CPA concludes that uncertainty is holding the industry back. The CPA comments that the conditions that have held construction back over the last 12 months are improving, but slowly, and risks, challenges, and uncertainty are set to continue. The challenge for project teams continues to be charting a course through these and finding a way to understand, track, and manage this risk and uncertainty.

Author contact

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

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