A subdued industry

Economic Week In Review | Issue 546 | 14 September 2026

UK construction and property

  • UK construction output grew just 0.1% in July 2026, with a sustained housebuilding downturn dragging overall output 2.5% lower than July 2025. Repair & maintenance and infrastructure saw positive gains; however, those gains are still too weak to offset falling housing activity, keeping overall growth subdued.
  • Building safety levy | Construction and property industry groups are urging the government to delay the Building Safety Levy, warning it could deepen the housing delivery crisis by making more projects unviable. From 1 October 2026, the levy will apply to certain residential and purpose-built student schemes entering building control, with charges varying by location and land type. The government aims to raise £3.4 billion over 10 years to fund remediation of unsafe buildings.
  • UK construction project starts were 20% lower year-on-year in the three months to August 2026, but the decline is easing, with starts only 2% down on the previous three months, indicating stabilisation rather than recovery, according to latest Glenigan data. The residential sector is weakest, hit by poor house sales, rising costs, and the upcoming building safety levy. Growth in the industry is currently being supported by infrastructure, healthcare and office projects.
  • Judicial reviews | UK Chancellor John Healey has announced plans to extend judicial review reforms to all nationally significant infrastructure projects to cut delays and boost economic growth and investment. According to the government judicial review challenges usually delay nationally significant infrastructure projects by about 18 months.

Global economy

  • US borrowing costs have hit their highest level in about three years after a $6 billion Treasury bond buyback failed to calm investors, pushing the 10-year yield to 4.85% and sharply increasing 20-year and 30-year yields.
  • ECB rates | The European Central Bank (ECB) raised interest rates from 2.25% to 2.5%, its second hike since June, in response to higher eurozone inflation driven mainly by energy costs. Energy inflation rose by 14.3% in the year to August due to disrupted oil supplies near the Strait of Hormuz, while core and services inflation declined, indicating that current inflation is largely caused by energy supply shocks rather than strong economic demand.
  • US inflation held steady at 3.4% in August, driven mainly by higher fuel costs, especially gasoline and diesel prices above $6 per gallon, which are squeezing household and transport budgets. As a result, markets increasingly expect the Federal Reserve to raise interest rates at its next meeting to prevent energy-driven inflation from spreading more broadly.
  • China is investing $54 billion in its state-controlled banks and insurers to boost economic growth and financial stability, reinforcing their balance sheets and lending capacity to businesses and households to support investment and economic activity.

UK economy

  • UK economy | The UK economy grew by 0.4% in July 2026 and over the three months to July, showing resilient, underlying growth driven mainly by the services sector and AI-related activity.
  • Tourist tax | Andy Burnham plans to give England’s mayors the power to introduce an uncapped tourist tax on overnight stays, raising concerns it could increase UK holiday costs, reduce tourism, and put hospitality jobs at risk.
  • Foreign investment in the UK fell by 21%, and its share of global sovereign investment dropped from 13% to 9% due to tax changes and business environment concerns, according to figures from the City of London Corporation. However, despite the fall in foreign investment, overall, UK investment rose by 5% to £4.1 trillion, driven by stronger domestic investment.
  • UK borrowing | The UK government is facing its highest long-term borrowing costs in nearly 30 years, with 30-year bond yields at 5.83%. UK gilt yields have risen faster than in any other G7 country, increasing pressure on government finances ahead of the upcoming budget.

Materials and commodities

  • Oil prices have climbed above $100 a barrel for the first time since July, prompted by growing concerns that escalating conflict in the Middle East could interrupt global energy supplies and key shipping lanes. Markets are now reflecting an increased risk of supply disruptions, which is already translating into higher fuel costs across the world.
  • Aluminium | The European Commission has withdrawn its plan to restrict aluminium scrap exports. The EU produces about 6.2 million tonnes of aluminium scrap annually, with 80% used within Europe.
  • LNG | QatarEnergy is seeking multi-year LNG deals with major US producers to replace 12.8 million tonnes per year of capacity lost after Iranian attacks, which is expected to take 3–5 years to repair. It aims to secure 2–3 million tonnes per year of US LNG through 2031 to meet customer commitments, mainly in Asia. This points to tighter competition for long-term LNG supply and prolonged disruption to global LNG exports.

Environment

  • Carbon footprint | Despite the EU’s efforts to reduce emissions domestically in 2023, 35% of the EU’s carbon footprint came from emissions abroad linked to imported goods and services, according to data from the European Climate Foundation (ECF) and climate consultancy Matière. While the EU uses tools like the Carbon Border Adjustment Mechanism and anti-deforestation rules, the study finds that international cooperation and shared environmental standards may be more effective than relying mainly on import taxes.
  • Record temperature | The Copernicus Climate Change Service reports that August 2026 tied with July 2023 as the hottest month ever recorded worldwide. During August, global temperatures were 1.65°C higher than pre-industrial levels, surpassing the 1.5°C threshold under the Paris Agreement.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 10,650.44 -1.67 14.73
FTSE 250 23,975.73 -2.48 10.87
Nikkei 64,011.34 -1.55 42.98
CSI 300 4,510.16 -0.83 -0.26
S&P 500 7,656.98 -0.80 16.24
Nasdaq 26,333.04 -0.66 18.93
CAC 40 8,179.77 -1.20 4.53
Dax 25,568.56 -1.83 7.89
$ per £ 1.3500 -0.42 -0.59
€ per £ 1.1700 0.36 1.01
Gold £/oz 3,216.69 -1.82 19.71
Brent Oil $/barrel 104.61 8.65 56.16

Weekly Summary

Construction output continues to remain subdued, mainly due to the ongoing downturn in housebuilding, which continues to offset the gains achieved in the repair & maintenance and infrastructure sectors. The introduction of the building safety levy in October, along with the additional cost burden associated with it, will do little to help project viability in the housing sector. Construction starts are still weak; however, the pace of decline appears to be slowing, suggesting stabilisation rather than a full recovery. Even so, there are encouraging pockets of growth, especially in infrastructure, healthcare, and office developments.

The UK economy expanded by 0.4% in July 2026, indicating solid underlying growth; however, borrowing costs have climbed to their highest point in almost 30 years, with UK bond yields rising more quickly than in any other G7 nation. This is adding pressure on public finances ahead of the upcoming budget at the end of October.

Author contact

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

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