Leading Indicators | Resilience beneath the noise: calmer rates and supportive credit for UK CRE in Q2

UK GDP showed signs of resilience ahead of Middle East tensions  

UK GDP rose by +0.5% m/m in February, ahead of expectations and marking the strongest growth since January 2024, with broad‑based gains across services and production, while construction also returned to positive territory. This points to an economy that entered Q2 with genuine underlying momentum. Set against this, Deloitte’s latest CFO Survey shows corporate confidence fell to a six year low in March, dropping to a net -57% as geopolitical risk, energy costs and interest rate concerns moved sharply higher on firms’ risk registers.  

Less noise, clearer direction in UK base rate forecasts  

Reports of a potential Iran deal point to de‑escalation, consistent with our view that broader market disruption remains contained, albeit with ongoing uncertainty. Markets have largely moved past the initial shock: oil has stabilised, rate volatility has eased and policy expectations have moderated. After briefly pricing multiple hikes, money markets have shifted back to around one hike this year, while economists expect the BoE to remain on hold at 3.75% for the rest of the year, assuming any inflation impulse proves temporary.  

Credit where it’s due: Banks’ appetite for CRE shows resilience  

For all the geopolitical noise, UK banks are not behaving like a sector under stress. The BoE’s Q1 Credit Conditions Survey shows CRE credit availability increased for a 9th consecutive quarter, with further easing expected in Q2  - despite capturing the early phase of the Iran conflict. While the pace of loosening has moderated, with the net balance of lenders planning to improve availability over the next three months easing to +10.1% in Q1 2026, conditions remain more supportive for property than for the corporate sector overall. Combined with stabilising rate expectations, this points to resilience rather than a renewed pullback in UK CRE.