The week ahead 09 June 2025 - Increased spending for UK infrastructure
What to watch out for in the UK economy and property market this week.
This week sees the publication of the government’s spending review, but already some of the more positive elements have been either officially released or leaked to the media. The Chancellor has committed to £15.6 billion of infrastructure investment for the UK regions, including tram extensions for Birmingham and Manchester, and a five-year deal for West Yorkshire that will kickstart development of new mass transit system for the region. The Treasury is also expected this week to make changes to its ‘Green Book’ rules on assessing capital projects to make them work better for the entire country. A report in The Sunday Times said major government investments in research and development (R&D) projects across the country will be rolled out.
The Prime Minister last week announced plans for increased defence spending, which will rise to 2.5% of GDP by the fiscal year of 2027-2028. The Navy will receive 12 new submarines and £5 billion is to spent developing ammunition factories in the UK. This will be a boost to UK manufacturing, particularly in regions that are major defence and aeronautics industry hubs. Although defence spending is typically thought of as mainly boosting heavy industries, the hi-tech nature of the modern military means this new investment will also benefit sectors such as artificial intelligence, R&D and cyber security.
While the government will this week want to keep the media attention on the investment spending in the review, Whitehall department budgets will be under pressure, with the Treasury seeking efficiency savings. There have been press reports that negotiations with the Treasury have gone to the wire for the Ministry of Housing, Communities and Local and Government, plus the Department for Energy Security and Net Zero.
This week’s other big economic news story is the UK monthly GDP figures for April. Both the PMI business activity index and the consumer confidence figures for April were weak. However, the retail sales data for that month were stronger than expected, which will have provided some upside to the GDP numbers. Plus, Easter falling in April might have boosted the leisure and hospitality industries. Overall, we believe the UK economy probably grew in April, but at a slow pace.
Investment Focus – Retail Property
Last month, according to Real Capital Analytics, retail investment volumes totalled £143 million. Based on the latest MSCI capital growth index, values for retail property have risen for nine consecutive months, increasing 2.3% during that period. The market though is polarised with much of the improvement driven by the retail parks / retail warehouse sub-sector, plus prime shopping centres and prime high street shops. Secondary shopping centres and shops still face challenging market conditions. Retail values (based on the MSCI capital growth index) are currently 17.6% below their June 2022 peak. We believe that because retail saw a sharp decrease in values pre-Covid, the correction in the recent downturn was less severe than for the other main commercial sectors.
This week's figures
WEDNESDAY 11 JUNE
US CPI Inflation, y-on-y, May
2.2% previous
2.5% forecast
Given the introduction of some of the Trump tariffs in April, we do expect some upwards pressure on price growth to be reported for May, but it will probably take longer for the new duties to have a big impact on US inflation.
THURSDAY 12 JUNE
UK GDP Growth, m-on-m, April
0.2% previous
0.1% forecast
Survey evidence suggested April was a weak month for the economy, although the retail sales figures were relatively strong. We are predicting marginal growth.
FRIDAY 13 JUNE
Euro Area Industrial Production, m-on-m, April
2.6% previous
0.8% forecast
Production spiked in March, which many commentators attributed to firms in the US rush ordering foreign goods ahead of the new tariffs expected in April. Consequently, we are forecasting slower growth in April.
