Weak demand, rising costs

Economic Week In Review | Issue 528 | 11 May 2026

UK construction and property

  • CPA | The Construction Product Association (CPA) predicts a 2.5% drop in construction output for 2026 due to the Middle East conflict driving up costs and inflation with weaker demand expected across the economy. Private housing is forecast to fall 7%, while infrastructure could grow 3.2% supported by government project pipelines, though uncertainty remains. A 1.2% recovery is expected in 2027.
  • Construction administrations | April 2026 saw a monthly drop in administrations but a 9% year-on-year and 77% two-year rise, indicating ongoing decline. Key causes include higher energy costs, geopolitical uncertainty, weaker demand, rising interest rates, and tougher refinancing conditions as the main cause of financial stress. Contractors’ face margin pressure, cost inflation, and working capital strain, making them more selective in bidding and investment.
  • UK construction output dropped in April as PMI fell to 39.7, driven by low demand, fewer new projects, and rising input costs (fuel, materials). Input cost inflation reached its highest since June 2022. Employment declined due to weak orders, project delays, and postponed investments amid cost and rate uncertainty.
  • Cyber security | Construction has the lowest cyber readiness confidence among nine industries, with only 74% feeling prepared and 32% of leaders concerned. Cyber-attacks can disrupt projects, raise costs, and impact supply chains. Many firms see cyber risk as just an IT issue, increasing vulnerability. Experts recommend making cyber security a core part of project planning and risk management.

Global economy

  • China’s manufacturing sector is demonstrating short-term strength, supported by exports and industrial production, as factory activity has grown for the second month in a row. Yet, a decline in new orders indicates that while growth persists, its pace is slowing, and overall progress is uneven because of subdued domestic demand and ongoing external uncertainties.
  • US trade deficit | The US trade deficit increased by 4.4% to $60.3 billion in March, coming in just under forecasts but continuing to expand overall. This growth was largely driven by a notable rise in imports associated with AI infrastructure. Imports climbed 2.3% to $381.2 billion, while exports grew by 2% to $320.9 billion. However, the increase in exports was not sufficient to balance out the higher import levels.
  • Tariffs | The US trade court has ruled against Donald Trump’s latest 10% global tariffs, finding across-the-board tariffs were not justified under the Trade Act of 1974. Despite the ruling, Trump signalled further action giving the EU until the 4 July to meet trade deal commitments threatening much higher tariffs, including raising EU car tariffs to 25% from previously agreed 15%.
  • US job growth beat expectations adding 115,000 jobs in April with the unemployment rate staying at 4.3%, indicating a relative stable labour market even amid economic disruptions, which have triggered an energy shock and higher fuel prices. While employment figures have fluctuated in recent months, April’s figures increase expectations that the Federal Reserve will keep interest rates on hold.

UK economy

  • UK manufacturing PMI hit 53.7 in April, the highest since May 2022. Output, new orders, jobs, and exports rose, especially to the US, China, Japan, and India. Supply chain issues and rising input costs led to higher selling prices for the fifth month. Some growth may be temporary as firms advance orders to avoid future price hikes and delays. Despite strong results, business optimism dropped to a one-year low due to geopolitical and growth worries.
  • UK employment | The Item Club forecasts, an economic forecasting group, the UK will lose 163,000 jobs this year, with lower-income regions like South Wales and the Humber most affected due to reliance on manufacturing and construction. Higher energy costs and supply issues are impacting these industries, while household spending cuts will slow job growth in retail and hospitality.

Materials and commodities

  • Brick and block deliveries dropped 3.3% and 3.6% in March. Brief monthly gains didn’t offset the overall decline. Ready-mix concrete sales fell 16.4% in the last quarter of 2025 year-on-year. Material price inflation accelerated, with the DBT index for “all work” up 2.6% in March 2026 from the previous year, after a 2.1% rise in February.
  • LNG | Ongoing shipping disruption in and around the Strait of Hormuz has caused QatarEnergy to extend its force majeure on LNG supply to mid-June. It is the latest significant indication of global LNG markets being disrupted into the summer particularly affecting the prospect of disrupted European storage refills.
  • Shipping | The Baltic Dry Index rose to its highest level since December 2023. Strong demand for Capesize vessels, mainly used for iron ore, is the main driver, alongside limited ship availability. The Middle East conflict is adding volatility and helping push freight rates higher. Strength is expected to continue in the near term due to ongoing demand and supply tightness.
  • Steel | Keir Starmer has announced plans to renationalise British Steel. The government took over British Steel’s Scunthorpe plant from Jingye Group in April last year to prevent its blast furnaces from closing.

Environment

  • Water pollution | The EU is tightening water pollution rules by expanding controlled substances and improving monitoring, aligning with scientific advances. These steps support zero pollution, water resilience, and public health. All member states must comply by December 2027.
  • Global warming | According to climate scientists, an intense El Niño on the horizon, together with continued global warming, may shift the Earth into a prolonged period of higher temperatures. This could lead to enduring effects on weather patterns, ecosystems, and human systems, extending beyond a temporary climate increase.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 10,233.07 -1.26 19.62
FTSE 250 22,849.38 1.41 11.44
Nikkei 62,713.65 5.38 67.22
CSI 300 4,871.91 1.34 26.67
S&P 500 7,398.93 2.33 30.73
Nasdaq 26,247.08 4.51 46.40
CAC 40 8,112.57 -0.03 4.76
Dax 24,338.63 0.19 3.57
$ per £ 1.3600 0.53 2.31
€ per £ 1.1600 -0.23 -2.15
Gold £/oz 3,458.17 1.74 38.37
Brent Oil $/barrel 101.29 -6.36 58.49

Weekly Summary

Last week’s construction PMI data indicates that the UK construction industry is experiencing weak demand and rising costs, with input cost inflation reaching its highest point since 2022. This is largely due to a shortage of new projects to replace those that have been completed and volatile energy prices affecting energy intensive industries. In contrast, the manufacturing sector shows more encouraging results, with increases in new orders, employment, and exports, with the PMI for April reaching its highest level since May 2022. However, some of this growth may be short-lived as companies have brought forward orders to avoid future price volatility and delays. As this effect diminishes, growth in new orders may slow later in the year, while inflationary pressures continue to persist.

In other news, Kier Starmer has announced plans to renationalise British Steel. Industry leaders say the move gives certainty to around 2,700 workers and customers with unions strongly supporting the move.

 

Author contact

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

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