Uneven Recovery

Economic Week In Review | Issue 543 | 24 August 2026

UK construction and property

  • Contracts awarded | Data from Glenigan shows a strong pipeline of UK contract awards in healthcare, education, and infrastructure, indicating positive future workload. However, falling planning approvals, especially in housing, and weak project starts show the recovery remains limited and sector specific.
  • Construction insolvencies | Recent Insolvency Service data shows construction is still the UK’s hardest hit sector, making up 17% of business failures in England and Wales in the 12 months to July, mainly among small firms. Experts link this to rising labour, material and energy costs, delayed project approvals, uncertain future demand, and ongoing geopolitical risks.
  • Construction vacancies | In the three months to July 2026, construction recorded about 31,000 vacancies, up 5.7% on the previous three months and 2.3% on the same period in 2025, beating the wider economy’s five-year low in vacancies. Demand is highest for civil engineers, electricians, and carpenters/joiners, but the sector still faces a major long-term skills shortage.
  • Workforce mobility | CITB research shows construction work is becoming more local: 34% of workers stayed within 20 miles of home over the past year, and those travelling over 50 miles fell from 32% in 2022 to 28% in 2025. As the traditional model of moving skilled workers around the country may no longer be sufficient, CITB recommends a more place-based skills strategy.

Global economy

  • US national debt has passed $40 trillion, just five months after hitting $39 trillion. This rise is driven by defence spending, social security and Medicare costs, interest on existing debt, and long-term government spending that exceeds tax revenue. The increase in debt has led the interest rate on debt, 30-year bonds, to rise to 5.26%.
  • Tariffs | President Donald Trump has warned that a 100% tariff could be imposed on the UK’s digital services sector, increasing pressure on the country to abolish its Digital Services Tax, which is currently levied at 2%. No deadline for the tariff implementation has been set.

UK economy

  • UK inflation rose to 2.9% year-on-year in July 2026, the highest since March, mainly driven by surging energy costs. Gas prices climbed at their fastest pace in almost four years, and a 13% rise in the energy price cap on 1st July added further pressure, with energy bills set to increase by about 4% in October. In contrast, food inflation eased to 1.3%, its lowest level in nearly five years.
  • Pay growth | Total pay growth rose slightly from 3.4% to 3.5% in the three months to June. Public sector pay grew 6.1%, boosted by NHS awards, while private sector pay growth slowed to 2.8%, the weakest since October 2020.
  • Job vacancies dropped to 707,000 in May-to-July, the lowest since 2021, and payroll employment fell by 13,000 in both June and July. Economists attribute this to higher employment and energy costs, economic uncertainty, and more automation in entry-level roles. The unemployment rate stayed at 4.9%.
  • UK private sector growth accelerated in August to its fastest pace in four months, driven by the service sector whilst manufacturing remained weak, according to latest S&P PMI data. However, the labour market remains soft, with 23 consecutive months of job losses, the longest decline since 1996. According to the British Chambers of Commerce, small firms’ costs have risen nearly 70% since 2016, with over a quarter of that increase since the 2024 Budget.
  • VAT | Prime Minister Andy Burnham will remove VAT on domestic electricity from 1 October 2026, cutting it from 5% to 0%. This is expected to reduce the annual Ofgem price cap by about £45 per household and lower CPI by around 0.10%, funded by cancelling the Digital ID programme.
  • Borrowing | The UK posted a £1.8bn deficit in July, with £56.7bn of borrowing so far in the 2026/27, £2.3bn above the Office for Budget Responsibility (OBR) forecasts. Higher spending, debt interest, and public service pressures have squeezed Chancellor John Healey’s expected fiscal headroom from £24bn to under £8bn, according to the Resolution Foundation, potentially creating a challenge for October’s Budget.

Materials and commodities

  • Copper | London Metal Exchange (LME) copper prices are rising as inventories fall, driven by US stockpiling ahead of possible tariffs on refined copper imports. This has tightened supply outside the US and raised prices. Tariffs would likely cause further price increases and supply constraints, while any delay or softening of tariffs could release US stockpiles back to global markets and ease price pressure.
  • Oil | The markets expect prolonged US-Iran tensions, which would drive oil prices higher. Analysts warn diesel and other refined fuels may face the greatest supply pressures, raising wider economic and inflation risks.
  • Aluminium | China’s surplus aluminium output is easing global shortages and keeping prices below post-Iran war peaks. In H1 2026, alloy exports almost doubled to 238,500 tonnes and semi-finished exports rose 18%. Rather than replacing lost Gulf aluminium, China is taking over more fabrication and processing, posing a long-term challenge for western manufacturers.

Environment

  • El Niño | The Met Office expects the current El Niño, combined with ongoing climate warming, to intensify global weather extremes and make 2027 very likely the hottest year on record. Sea surface temperatures in the central and eastern Pacific are already over 2°C above normal, with forecasts suggesting they could exceed 3°C later this year.
  • EU greenhouse gas emissions rose 0.3% in Q1 2026 compared to the previous quarter, mainly due to the energy and construction sector, but remain 1.2% below last year with GDP being 0.8% higher. This suggests the trend of economic growth with lower emissions continues, an important signal as the EU works toward a 55% emissions reduction by 2030.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 10,816.56 0.62 16.04
FTSE 250 24,718.82 -0.43 11.97
Nikkei 66,016.36 -3.93 54.85
CSI 300 4,618.90 -1.01 5.50
S&P 500 7,674.37 -1.43 18.67
Nasdaq 26,180.46 -2.05 21.79
CAC 40 8,469.58 -1.82 6.27
Dax 26,082.13 -1.36 1.06
$ per £ 1.3600 0.56 0.78
€ per £ 1.1700 0.01 1.21
Gold £/oz 3,374.90 4.36 35.39
Brent Oil $/barrel 92.67 4.69 37.86

Weekly Summary

UK inflation increased to 2.9% in July, mainly pushed up by rising energy prices linked to the conflict in the Middle East. This rise comes as UK private sector growth has picked up to its fastest rate in four months, with the service sector leading the improvement. Despite this positive momentum, the labour market remains fragile, with unemployment continuing to rise and worries growing over higher business costs.

In the construction sector, job vacancies have increased, outperforming the wider economy’s five-year low in vacancies. This indicates a growing pipeline of work, a sentiment echoed by data from Glenigan which highlights a strong pipeline of UK contract awards in healthcare, education, and infrastructure. The key challenge is now delivery rather than opportunity, as delayed investment decisions, planning bottlenecks, slow project mobilisation, and financing uncertainty are disproportionately impacting different sectors with recovery remaining uneven.

Author contact

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

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