Tentative growth

Economic Week In Review | Issue 538 | 20 July 2026

UK construction and property

  • UK construction output decreased by 0.8% in May 2026, after a revised drop of 0.1% in April. Compared to May 2025, output was down by 1.8%. The primary factor behind this reduction was repair and maintenance. However, new work saw a modest increase of 0.2% in May, despite the overall downturn.
  • Project starts | According to Glenigan’s data, project starts, and main contract awards decreased in Q2 2026 compared to Q1 2026. On a positive note, planning approvals saw a 13% rise, and civil engineering project starts experienced a significant 73% year-on-year increase, mainly due to road, port, and harbour projects.
  • Late invoices | In 2025, large construction firms paid 14% of invoices late, performing slightly better than other large UK businesses according to government data. The government is progressing with the Commercial Payment Bill to protect small suppliers by empowering the Small Business Commissioner and setting legal payment term limits.
  • Cladding remediation | NISTA has downgraded the cladding remediation programme to red status, meaning successful delivery is unlikely without major intervention. Key issues include BSR delays, more social housing needing repairs than expected, and rising construction costs affecting affordability and timelines.
  • Apprenticeships | A National Audit Office (NAO) report shows just 74 started the construction foundation apprenticeship by April 2026, well below the 1,000 targets for 2025/26. A late scheme launch left providers only three months to prepare and recruit prospective apprentices
  • Construction insolvencies | Construction had the most business failures in England and Wales, with 3,805 insolvencies in the year to June 2026. Ongoing challenges include high borrowing costs, weak housebuilding, low buyer confidence, slow land sales, project delays from cautious clients, planning issues, and postponed investments.
  • Judicial review reforms | The UK government has initiated a six-week consultation to explore expanding judicial review reforms to significant housing and infrastructure projects. This effort seeks to minimise planning delays and accelerate the completion of homes, transport initiatives, and energy infrastructure. The consultation is evaluating options such as restricting repeated judicial review claims after previous challenges have been unsuccessful, establishing more transparent and expedited court schedules, and extending reforms currently in place for Nationally Significant Infrastructure Projects (NSIPs) to a broader array of major developments.

Global economy

  • US inflation slowed in June 2026, with CPI up 3.5% year-on-year versus 4.2% in May, mainly due to a 9.7% drop in gasoline prices. However, renewed Middle East conflict has driven oil prices higher, raising concerns about future fuel costs and inflation.
  • China’s annual growth in Q2 2026 grew 4.3%, down from 5% in Q1 and below the 4.5%-5% target. The slowdown was attributed to weak demand, rising energy costs, and property slump. However, June exports rose 27% year-on-year, led by AI tech and EVs.

UK economy

  • UK economy | In May 2026, the UK economy expanded by 0.1%, bouncing back after a minor decrease in April. The services sector led this growth, although both production and construction saw declines. Experts note that the economy has shown greater resilience than anticipated, but it still faces risks from increasing energy costs and reduced business activity.
  • Public spending | The IMF has cautioned incoming Prime Minister Andy Burnham about making substantial increases to public spending, recommending instead that he prioritise lowering the government budget deficit in light of growing debt and ongoing fiscal challenges. The IMF suggested that ministers should carefully choose any new spending initiatives, shift resources among departments instead of raising total spending, and refrain from implementing widespread tax increases, as these could negatively impact economic growth.
  • Health standards | The Health Foundation has released a new report suggesting that restoring health to 2014 standards could greatly enhance the economy and public finances. According to the thinktank, improved health may raise economic output by £57 billion, which represents about 2% of GDP, and provide a £72 billion benefit to public finances through increased tax revenue and reduced NHS and welfare costs.

Materials and commodities

  • OPEC has lowered its 2026 global oil demand growth forecast for the third consecutive month, now predicting a 780,000 barrels per day (bpd) increase—down 190,000 bpd from prior estimates—due to the Iran conflict and market uncertainty.
  • British Steel | The UK government has officially transferred British Steel into public ownership, with the process finalised on 16 July 2026 after plans were revealed earlier in the year. There are ongoing concerns regarding the future expense for taxpayers and how this may affect steel prices with Jingye Group threatening to take legal action against the UK government.
  • Aluminium | The Aluminium Federation ALFED has secured broader access for UK aluminium producers to the Government’s British Industrial Competitiveness Scheme (BICS), after significant lobbying. BICS reduces electricity costs by exempting qualifying manufacturers from some energy charges, offering financial support to energy-intensive aluminium and cast-metal producers and boosting UK industrial competitiveness.

Environment

  • EU ETS | A Grantham Research Institute study found the EU ETS cut emissions by 41% from 2021-2023 compared with a scenario in which the carbon market did not exist, showing carbon pricing has been an effective tool in reducing emissions.
  • Climate change | The Met Office reports the UK’s climate is changing, with higher temperatures, more frequent heatwaves, and increased droughts making extreme weather the new normal. From 2016-2025, average temperatures were 1.33°C higher than 1961-1990, and southern England’s hottest days are now typically 4.5°C warmer.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 10,600.37 0.98 17.89
FTSE 250 23,604.83 1.00 7.79
Nikkei 64,141.12 -6.44 61.08
CSI 300 4,529.10 -5.26 11.59
S&P 500 7,457.69 -1.55 18.44
Nasdaq 25,520.24 -2.90 22.13
CAC 40 8,338.81 0.00 6.60
Dax 24,830.98 -0.94 2.23
$ per £ 1.3400 0.38 0.07
€ per £ 1.1800 0.56 2.09
Gold £/oz 2,986.69 -2.82 19.55
Brent Oil $/barrel 88.10 15.91 27.17

Weekly Summary

The latest economic figures from the ONS revealed that the UK economy grew by 0.1%, with the service sector leading this growth. However, both construction and production experienced declines. In April, UK construction output fell by 0.1%, mainly due to a drop in repair and maintenance activities. Despite this, new construction work saw a slight increase, even as the overall sector faced a downturn. These numbers have been released as Andy Burnham is sworn in as the new UK Prime Minister, all while the IMF advises the incoming Prime Minister to be cautious about significantly raising public spending due to increasing debt and persistent fiscal difficulties.

The UK government has initiated a six-week consultation to explore expanding judicial review reforms to significant housing and infrastructure projects. For developers and contractors, these reforms may help address a major source of project delays by streamlining legal challenge procedures and offering more clarity regarding planning decisions.

Author contact

Rachel Coleman
Rachel Coleman,
Director, Market Insight
Kishan Patel
Kishan Patel,
Research Analyst

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