Economic Week In Review | Issue 542 | 17 August 2026

UK construction and property

• Merger | HIG Capital has acquired a majority stake in Phoenix ME. The investment will fund growth, project procurement, UK and European expansion, and sector growth. The company has noted that data centres are now the largest market, with demand increasing substantially over the past three years.
• Construction T levels saw record completions in 2025/26, but the onsite construction T level had the lowest pass rate at 75.1% and will be discontinued after the 2025/26 cohort due to low demand. The National Audit Office has highlighted low employer involvement and a 10-year low in training investment per trainee as major challenges for the government’s construction skills strategy.
• New orders | The ONS reports Q2 2026 construction new orders dropped £1.2bn (12%) from last quarter, mainly due to less private commercial work. This points to a softer future workload pipeline. Infrastructure remains positive, but planning delays, high costs, skills shortages, and uncertainty still challenge the sector.
• UK housing market | The UK housing market sees its weakest August since 2018; average new home prices were down 2% to £364,999 and are now 1% below last year due to higher mortgage rates. Uncertainty from geopolitics, mortgage rates, and Budget adds further pressure on prices. There’s also a growing North-South divide: northern prices are up 1.5% year-on-year, while southern prices have fallen by 1.8% over the same time period.

Global economy

• US inflation eased to 3.4% in July 2026 from 3.5% in June, aided by lower energy and slower food price rises. Fuel prices dropped 2.9% month-on-month but stayed 24.6% higher year-on-year due to Middle East energy market volatility.
• US borrowing costs for 30-year Treasury bonds reached 5.22%, the highest level in 25 years. Investors are seeking higher returns due to ongoing high inflation, the swift increase in US government debt, worries about long-term fiscal sustainability, and significant government borrowing needs.
• Eurozone GDP | According to a flash estimate from Eurostat, Eurozone economies grew by 0.4% in the second quarter of 2026, even as challenges from the Middle East conflict persisted. The broader EU economy performed even better, recording a quarter-on-quarter growth of 0.5%. Employment in both the euro area and the EU rose by 0.1% in Q2 2026 compared to the previous quarter.
• Japan’s GDP increased by 0.3% quarter-on-quarter in Q2 2026, falling short of the anticipated 0.5% growth. This outcome points to continued softness in domestic demand, as private consumption stayed unchanged and business investment declined. The main driver of growth was exports. On an annualised basis, the economy grew by 1.1%.

UK economy

• UK economy | The UK economy grew 0.4% in Q2 2026, down from 0.6% in Q1, but still outperformed other G7 nations in the first half of 2026. Growth was driven by computer programming, advertising, and pharmaceuticals. The economy is 1.2% larger than last year. However, the Treasury warns growth could slow to 0.9% in 2026 and 0.3% in 2027 if Strait of Hormuz disruptions persist under a prolonged disruption scenario.
• AI boot camp | The UK government is launching an AI boot camp pilot aimed at helping unemployed or at-risk youth gain job skills and improve employment prospects. The initiative is part of an effort to tackle the growing number of Neets (young people not in employment, education or training).
• Economic loss | According to a report from the thinktank Verdant, the UK’s ongoing heatwaves have resulted in an estimated £4.4 billion loss in economic output by the end of July 2026. If the intensity of heatwaves continues at the same rate as the past decade, Verdant projects that annual economic losses could surpass £25 billion by 2030.
• Consumer confidence | The S&P Global UK Consumer Sentiment Index dropped to 42.9 in August, the lowest since 2023. Labour market confidence hit a 41-month low, showing increased job concerns. Despite economic growth, consumers are cautious due to job insecurity, lower incomes, reduced savings, and expected rate hikes, which may keep household spending subdued.

Materials and commodities

• Copper | The Democratic Republic of Congo (DRC) has enacted an immediate ban on the export of copper and cobalt concentrates, aiming to boost local mineral processing. LME copper prices increased by up to 1.8%, marking their highest level since January 2026 due to concerns about supply disruptions. However, analysts note that the overall effect could be minimal since the majority of Congolese copper and cobalt undergoes domestic processing prior to export.
• China’s steel sector is facing a notable slowdown as ongoing economic challenges and an extended property-sector crisis keep demand low. In the first seven months of 2026, total steel production reached 577.04 million tonnes, marking a 3.1% decrease compared to the same timeframe in 2025.
• Exchange rates | The pound has reached its highest level in three months as the dollar loses strength. This shift is driven by concerns over increasing US national debt and last week’s weaker-than-expected US economic data, such as a decline in retail sales and reduced consumer confidence.

Environment

Drought | The UK Government, Environment Agency, and Met Office have reported that 71.3% of England is now officially in drought following the driest July in 190 years and a particularly dry start to August. Around 45 million people are currently living in drought-affected regions, and over 27 million are subject to water-use restrictions, including hosepipe bans and similar rules.

Heatwave | Last Thursday, the UK experienced its hottest day of 2026 to date, with temperatures climbing to 38.1°C. This temperature is among the highest ever documented in the UK.