Trade, again

Economic Week In Review | Issue 517 | 23 February 2026

UK construction and property

  • Construction activity |According to new data from Glenigan, the UK construction industry saw a steep decline in activity in the three months to January 2026, reflecting the ongoing drag of a sluggish economy, weak private investor confidence, slow demand, and rising production costs. Project starts fell by 31%, and planning approvals were down 30% over the same period. Although most sectors showed an overall decline in activity, some sectors, like education and community & amenity, recorded positive figures.
  • Insolvencies | The UK’s construction industry recorded the highest number of insolvencies of any sector in 2025, marking the fourth year in a row it has topped the insolvency rankings. According to Insolvency Service data, 3,931 construction firms became insolvent, representing 17% of all cases across the economy. Although still severe, the total was slightly lower than in 2024, when 4,032 construction firms collapsed.
  • Affordable homes |London is on course to miss its recently reduced affordable homes target by a significant margin, according to new City Hall figures. Fewer than 8,000 homes have started under the 2021-26 programme, meaning almost 10,000 more homes are needed in the final three months to reach the lowered goal.

Global economy

  • Tariffs |To boost China-Africa trade, China announced it will eliminate tariffs on imports from 53 African countries starting from 1st May, significantly expanding its zero-tariff regime.
  • Subsidies | The IMF has called on China to halve its industrial subsidies, from roughly 4% of GDP to about 2%, and to move towards consumption-led growth. The IMF argues that, while subsidies have supported some tech innovation, their overall effect has been negative, leading to resource misallocation.
  • US deficit | The trade deficit in the US reached a record $1.2 trillion in 2025, despite President Trump’s sweeping global tariffs, which were intended to reduce reliance on imports. Import growth outpaced exports, widening the deficit by 2.1% compared to 2024, despite a major fall in trade with China, where the deficit narrowed to its smallest level in two decades after tariffs significantly reduced bilateral flows.
  • US economy | The US economy grew at an annualised 1.4% rate in Q4 2025, a significant slowdown from the previous two quarters. A downturn in government and consumer spending contributed to the slowdown. Consumer spending rose just 2.2%, a slowdown from the 3.5% gain seen in Q3.
  • US tariffs |The US Supreme Court ruled that President Donald Trump illegally imposed sweeping global tariffs, overstepping presidential authority by using emergency powers to justify broad import duties. The ruling could result in hundreds of billions of dollars in tariff refunds. The ruling does not cover tariffs on steel and aluminium as this comes under Section 232, rather than the “reciprocal tariffs”.

UK economy

  • UK unemployment has risen to 5.2% in the three months to December, up from 5.1% in the previous quarter. This is the highest level since early 2021 and, outside the pandemic, the highest in over a decade. Vacancies rose by 2,000 quarter-on-quarter to 726,000 in the three months to January. However, the number of unemployed people per vacancy is now at a post-pandemic high, reflecting weaker hiring. Furthermore, regular pay growth slowed to 4.2%—its lowest level in nearly four years.
  • UK inflation has dropped to 3%, with analysts believing inflation is on track to reach the 2% target by spring, driven by falling household bills and the reduction in the energy price cap in April. Food inflation is also expected to moderate, having been a significant contributor to high inflation last year. The downward trend has prompted hopes that an interest rate cut will follow.
  • Budget surplus | The UK government has recorded its largest January budget surplus since records began in 1993, driven by higher tax revenues and lower borrowing costs. In January, the government took in £30.4bn more than it spent, outperforming expectations from the OBR by around £6.3 billion. Government spending remained broadly unchanged, so higher revenue directly boosted the surplus.
  • UK manufacturing |British manufacturers continue to struggle with weak demand and persistent cost pressures, according to the latest CBI Industrial Trends Survey. Order books remained well below average in February, reflecting ongoing softness in both domestic and international demand.

Materials and commodities

  • Steel tariffs | EU steel exports to the US fell 30% between June and December 2025. The fall has been attributed to the 50% US import tariffs imposed on EU steel. Although the EU and US signed a broader trade deal in July 2025, which set a blanket 15% US tariff on EU goods, steel was excluded from the arrangement.
  • British Steel has begun round-the-clock rail manufacturing operations for the first time in more than a decade after securing a major contract with Turkey. The order, said to be worth tens of millions of pounds, is for a 372-mile high-speed electrical railway between the capital, Ankara, and the port city of Izmir.

Environment

  • Shipping | The UK shipping industry has sharply criticised the government’s plan to extend the UK ETS to domestic maritime from 1st July 2026, warning that rushed implementation could damage competitiveness, increase costs for island communities, and slow progress towards net zero. The amendment will formally extend the UK ETS to cover GHG emissions from vessels of 5,000 gross tonnage and above.
  • IEA | The Trump administration has warned that the US may withdraw from the IEA within a year unless the organization abandons its net-zero by 2050 climate agenda and returns to a focus on energy security, fossil fuel supply, and traditional energy data reporting.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 10,686.89 2.30 23.36
FTSE 250 23,751.56 1.38 15.22
Nikkei 56,825.70 -0.20 46.55
CSI 300 4,660.41 0.00 17.14
S&P 500 6,909.51 1.07 14.91
Nasdaq 22,886.07 1.51 17.22
CAC 40 8,515.49 2.45 4.43
Dax 25,260.69 1.39 13.34
$ per £ 1.3499 -1.06 6.76
€ per £ 1.1459 -0.30 -5.25
Gold £/oz 3,789.20 2.62 63.02
Brent Oil $/barrel 71.30 5.24 -3.71

Weekly Summary

The fact that global tariffs are in the spotlight again will be a cause of nervousness for many, especially as the UK doesn’t have clarity over what the new 15% global tariff means for the UK/US agreement struck last year, which lowered the rate to 10%. Trade uncertainty can impact consumer price inflation and GDP growth, which will be closely monitored. For many, the timing of the challenge is important; the US is in a midterm election year.

Closer to home, the rising unemployment rate and falling job vacancy rate show that the jobs market has changed in the face of increased employment costs and greater automation. Yet, analysts suggest that there are still pockets of strength, and wages have continued to grow.

Author contact

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

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