The first quarter of 2025 has seen increased volatility in the global economy. US tariffs on key trading partners and its potential withdrawal of support from Ukraine have prompted the UK and European countries to reassess their domestic economic priorities.

In the UK, GDP grew by just 0.1% in Q1 2025, following no growth in the previous quarter. The Bank of England (BoE) expects CPI inflation, currently at 2.8%, to rise temporarily – potentially reaching 3.7% – before gradually returning to the 2% target. This means further interest rate cuts beyond the current 4.5% are likely to be delayed.

Meanwhile, the OBR reports that since the October 2024 Budget, the £9.9 billion financial buffer anticipated by the Chancellor has been allocated to unforeseen costs and debt. This has led to a significant rethink of departmental budgets.

Despite this, the Government has confirmed its long-term investment commitments outlined in the Autumn Statement. The New Hospital Programme will go ahead with a phased delivery approach. This will be structured around five-year investment waves of approximately £15 billion each – averaging £3 billion annually from 2030.

Private sector investment will also be needed to fully realise the Government’s construction plans. But this is unlikely to come until economic conditions improve and interest rates go down to around 4%. If this threshold is met, it could trigger a surge in viable projects, potentially straining industry capacity. This may lead to procurement delays and short-term price increases.

To reduce these risks, project teams must be proactive. Engaging with suppliers early is crucial. This will help secure their interest and access to the best teams and responses, while minimising the risk of unexpected delays.