UK construction outlook
Output and new orders
Output and orders show upward movement
UK construction grew for the third consecutive quarter in Q2, with infrastructure a driving force. New work made up most of this rise. This trend is positive, though market confidence is still cautious.
Housing market shows signs of life
Private housing is showing signs of recovery, notwithstanding house price inflation slowed from 3.3% in Q1 to 2.5% in Q2. The April Stamp Duty rise likely played a role.
Even so, market conditions remain fair, and activity should pick up in summer.
Early engagement is key
A lack of labour can delay programmes and drive up costs. The best way to manage this risk is early engagement. Working with contractors at an early stage can help secure capacity and reduce scheduling uncertainty.
Clients should also consider developing pipelines of work that retain regional and specialist talent. Aligning project schedules across programmes ensures continuity, allowing people and skills to move efficiently between sites.
Annual growth is modest, but the trend is improving
The latest Building information cost service (BCIS) forecast shows output rising by 2.2% in 2025. That’s a clear step up from 2024, when the sector shrank by -0.4%.
Longer-term growth looks strong. Still, uncertainty is holding back major investment, especially in big commercial schemes.
Labour costs are rising, impacting tender prices
April’s rise in employer National Insurance has pushed labour costs up. BCIS data shows a 7.3% year-on-year increase in Q2, with expectations of this translating into a +0.75% uptick in overall tender prices. Labour shortages are also putting pressure on some regions, especially where workers are moving to large infrastructure jobs. The impact of this trend has been felt in Scotland, in particular.
Construction output
+0.5%
in Q1 2025
New work orders
+26.6%
in Q1 2025
It shows a quarter-by-quarter volatility in the data – the rise has been much more modest over the 12-month cycle.
Materials and commodities
Prices have eased – but careful planning still matters
Material price inflation has eased since its 2022 peak and is now lower than it was a year ago. The earlier spike was driven by energy shocks, supply chain disruptions and the war in Ukraine.
Today, supply is stronger than demand. Prices have mostly returned to normal. BCIS data shows a 0.3% price increase in the year to Q2 2025.
Government data also shows a -0.9% price drop in January 2025, compared with January 2024. Steel prices fell by –10.0% in the same period.
MEP trades stabilising, but pressure remains in some areas
Prices for materials linked to mechanical, electrical and plumbing (MEP) trades have fallen. These materials are energy-intensive and sourced globally, so they remain sensitive to shocks. For now, markets are stable.
However, pressure is building elsewhere. We’re seeing increased demand for packages such as dry-lining, which are key to commercial fit-outs. As activity picks up, so does the risk of lead time delays or localised shortages.
Plan ahead where supply is tight
In areas with rising demand, early procurement helps manage risk. Buying ahead can lock in price and supply, especially for materials with long lead times. But early buying must be planned. Storage adds cost, whether on site or through a supplier.
Targeted procurement planning can offer clients real value. The key is knowing where to act early, and where to hold back.
In the year to January 2025, material price index for ‘all work’
-0.9%
Steelwork prices
-10%
Procurement
Cautious optimism as momentum builds
At the mid-point of 2025, confidence is building. Private commercial projects are moving forward, often in stages. Residential interest is growing. The New Hospital Programme is gaining pace. Infrastructure delivery remains steady.
The challenge now is to support this growth while managing risk.
Regulation is evolving, with more flexibility emerging
We are seeing early signs that regulators are exploring ways to manage the gateway approval process under the Building Safety Act 2022 with more flexibility. This should reduce delays while keeping compliance strong. This is a welcome step for complex projects.
Tendering is picking up pace, with some changes
Contractors are showing more interest in new tenders. Two-stage procurement is still the norm for larger schemes. But some contractors are now willing to commit to fixed-price contracts from the start. This can reduce delays caused by extended negotiations.
Our view: stay flexible, stay focused on value
The procurement landscape is shifting. By staying open to new models, engaging suppliers early, and focusing on long-term value, clients can move forward with greater confidence.
Construction industry vacancies
+17.1%
in Q1 2025
Construction insolvencies
+13%
This follows two quarters of decline. The market is recovering, but still fragile. Business failures, especially among larger suppliers, remain a risk.