UK Economy & Housing Marketbeat Reports

For the data behind the commentary, download the full May 2026 UK Economy & Housing Report.

DIRE STRAITS? 

As of the time of writing, the threat of kinetic warfare between the US and Iran remains, with blockades of the Strait of Hormuz still in action. Both Iran and the US have actively detained, disabled or attacked commercial tankers.  

However, notwithstanding the conflict’s impacts on bond and currency pricing, domestic travails have had a further negative impact on the UK economic outlook – despite a month of relatively positive economic data, with GDP, PMI and employment surprising on the upside. 

The dire performance of the Government in the local elections has created a leadership challenge for Keir Starmer. As of the time of writing, Wes Streeting had resigned, Angela Rayner had declared that the government was on its “last chance” and a by-election had been called for Makerfield, creating an opportunity for Andy Burnham to stand for election.  

While not certain, there is the potential that come the summer, the UK has a new Prime Minister. All current alternatives to Prime Minister would be seen as fiscally looser candidates than the current leadership of Starmer and Reeves.  

Even prior to the current questions over UK leadership, bonds had already risen by more than other developed markets since the Iran War began. This was reflective of the fact that the UK was previously expecting rate cuts prior to the war – not the case in the Eurozone.  

However, since the most recent political volatility, sterling has fallen to below GBP/USD1.360 and 10 year bonds have surged higher than at any time since 2008, as high as 5.14%. With almost no headroom, any potential for the prospect of loosening fiscal policy from potential new leaders will have a further impact on the bond market.  

Despite the relatively positive data points across inflation and GDP, the likelihood is that until there is a resolution to the War in Iran, and we have clearer direction on Government, the outlook for the economy and in turn the real estate market will be uncertain.