KEY INDUSTRY CHALLENGES
Escalating construction costs become a primary industry challenge
The market dynamics observed across sectors are closely linked to a set of persistent structural constraints and evolving external pressures.
Skilled labour shortages remain the most significant challenge, with an impact score of approximately 3.5, continuing a long-term trend. This constraint underpins many of the capacity and delivery challenges across the sector, particularly in an environment where demand remains concentrated in a limited number of key sectors
Government red tape and delayed approvals also remain a key barrier, with an impact score of c.3.1. These issues directly affect the pacing of new project releases, contributing to the reliance on existing public-sector pipelines and limiting the expansion of private-sector activity.
A notable development in 2026 is the increasing prominence of market competition as a constraint. The challenge of ‘too many contractors chasing too few projects’ has intensified, reflecting strong delivery capacity across the industry alongside a more selective pipeline of opportunities. This dynamic is consistent with tendering conditions, where 77% of respondents report ‘lukewarm’ market conditions characterised by strong competition and moderate pricing.
External cost factors are also becoming more influential, particularly energy price volatility and supplier pricing risk. These factors are increasingly cited as having a material impact on project delivery, highlighting ongoing exposure to global supply chain and geopolitical pressures.
External cost volatility, particularly energy and supplier pricing, is becoming an increasingly important factor in project delivery and viability
Encouragingly, programme durations and material lead-in times have stabilised in the short term, with over 60% of respondents reporting no increase in programme durations. This suggests that, despite ongoing pressures, the industry continues to demonstrate resilience and adaptability in managing delivery timelines.
However, this stability is likely to remain sensitive to external cost pressures and supply chain dynamics. Overall, the challenges facing the sector remain largely structural in nature, but are being actively managed, with the market continuing to adjust to a more competitive and cost-sensitive environment.
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