Leading Indicators | Turning the page: navigating the road to 2026

Interest rates: what’s next for 2026? 

As inflation trends lower, markets are increasingly focused on the depth, rather than the timing of next year’s rate cuts. Capital Economics expects 25bps cuts from both the BoE and the Fed in December, with the ECB likely to hold. For 2026, they forecast 3 further BoE cuts, taking the base rate to 3.00% by Q4, while markets anticipate a more modest 50bps of easing and an end-year rate near 3.25%. A shift towards less-restrictive policy would typically push gilt yields lower, though the extent will depend on how durable the disinflation trend proves.

Global capital steps back into the UK

UK CRE investment remained resilient in 2025, with preliminary YTD volumes at £40.1bn. With several deals still progressing, full-year totals could finish close to last year. Cross-border capital has been central to activity, supported by renewed interest in core sectors (offices, retail and industrial), where volumes are up +3% YTD. This has been reinforced by stronger overseas inflows, with the UAE (+1631%), Australia (+769%) and Germany (+505%) already surpassing 2024 levels.

From turbulence to calm - geopolitical risk falls back

Geopolitical tensions were a defining headwind in H1 2025, with tariffs and trade disputes weighing on confidence and slowing investment. Since mid-year, however, the backdrop has shifted. The Geopolitical Risk (GPR) Index fell -33% in November to its lowest level since February, indicating that much of the earlier uncertainty has eased. Heading into 2026, the question is whether this calmer tone can hold. For now, lower geopolitical stress points to a more stable backdrop -supportive of cross-border appetite and UK CRE sentiment.