A positive construction outlook points to recovery, with a shift toward innovative procurement strategies to address rising costs tied to labour demand, materials, and, primarily, the Building Safety Act, the latest market intelligence reveals.
Construction consultancy, McBains predicts a two per cent rise in tender price inflation for 2025 and 2026, suggesting steady recovery after challenges like rising costs, planning delays, and labour shortages.
Drawing on data from the Construction Products Association, the Royal Institution of Chartered Surveyors, the Office for Budget Responsibility, the Building Cost Information Service, plus more, the Construction Market Report for summer 2025 highlights several emerging trends.
Most organisations remain cautious about pricing risk, with Colin McCaffrey, director at McBains noting that “innovative procurement strategies” are being explored to negotiate large two-stage contracts.
These include a move toward package-based procurement models, self-delivery of services through smaller, separately procured trades, and increased co-investment opportunities – all offering alternatives to traditional lump-sum contracts.
Several tier two contractors are increasingly considering single-stage tendering, citing delays for higher-risk buildings under the Building Safety Act and the three-stage gateway approval process by the Building Safety Regulator.
The report forecasts market output to hit £168.6 billion, driven by private housing, infrastructure, and retrofitting, with construction output expected to grow by 1.9 per cent this year and 3.7 per cent next year.
In the housing sector, government initiatives are expected to spur growth, while industrial output, particularly in logistics and manufacturing, is also expected to rise.
Infrastructure output, especially, is predicted to increase by 4.5 per cent next year.
However, higher education faces a 10-20 per cent decline in capital expenditure, prompting universities to pause construction and partner with private developers.
Ongoing challenges, such as supply chain constraints, rising labour costs, an ageing workforce, and economic uncertainty, are expected to persist, affecting investment decisions and project timelines.
Nevertheless, McCaffery said the forecast was optimistic.
He said: “The report shows that medium-term confidence is buoyant, with growth in private housing, infrastructure and industrial work predicted”.
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