The Builders Merchants Federation (BMF) has downgraded its baseline forecast for 2026 from +2.3% to -1.8%, citing geopolitical uncertainty, subdued consumer confidence and weak economic conditions as reasons for the change.
The BMF Industry Forecast Summer 2026 outlines a range of factors contributing to a more cautious outlook for the construction supply chain. These include the much weaker-than-anticipated start to the year, due to poor weather in January and February, compounded by the ongoing effects of conflict in the Middle East.
Building materials for new housing and home improvement projects form the core of builders' merchants' sales. Both segments have been adversely affected by subdued consumer confidence, which has weakened demand over a sustained period. With housebuilders also facing increased costs that are exacerbating site viability, output is expected to fall further in 2026 as they await greater certainty about the economic outlook.
Such certainty is only likely to come from UK government support or a permanent resolution to the conflict in the Middle East.
The baseline forecast expects market conditions to deteriorate as the year progresses, with the conflict's knock-on effects feeding into the UK economy. It is, however, tempered by lower and upper forecast scenarios of -3.2% and +1.1% – the latter requiring government stimulus to reignite key market areas, including housebuilding and domestic RMI.
John Newcomb, CEO of the BMF, said: "The UK experienced the largest downgrade in growth expectations among the G7 economies in the International Monetary Fund's (IMF) latest GDP forecasts. The labour market has also softened in recent months, further eroding confidence amongst UK consumers and businesses.
"Construction is one of the most vulnerable areas of the economy, with elevated levels of business distress and insolvencies highlighting the challenges facing many firms.
"It comes as no surprise that businesses are growing more cautious. Recent activity indicators point to a sector that continues to struggle to gain momentum, with weaker workloads, delayed project starts and ongoing concerns about future demand.
"For the building materials sector, these conditions have created a challenging trading environment. Demand has remained under pressure across several key product categories, particularly those linked to new housing activity, where the rising cost of materials is outpacing UK inflation."
The BMF Forecast combines a comprehensive analysis of merchant market performance, drawn from its Builders Merchants Building Index, produced monthly and regarded as the key indicator of current RMI activity, with an examination of key factors affecting builders' merchants to project future sales.
John Newcomb added: "While the overall picture is fairly dire, our BMBI data does reveal the reasons why some regions are facing the greatest challenge. Markets such as London, with greater exposure to housing and commercial development, have generally faced the most difficult conditions, while others including Scotland and the North East have demonstrated greater resilience through a stronger mix of infrastructure, maintenance and repair activity. Online sales channels have also continued to provide opportunities for growth, reflecting changing customer purchasing behaviour."
While trading conditions are expected to be difficult in the short term, the BMF forecast, looking further ahead, retains a degree of optimism for a gradual recovery in the latter half of 2027, anticipating potential growth of +1.7% for the whole year.
