TENDER PRICE INFLATION FORECAST (TPI)
Construction materials costs stabilising
The latest modelling from the Building Cost Information Service (BCIS) suggests that material cost inflation was subdued at the end of 2025, recording a quarterly increase of 0.2% in December and an annual rise of 3.0%. As with any composite index, the various materials in the calculation have seen different pressures. While the price of scrap steel, imported plywood, and gravel, sand, and clay fell in the year to October, the cost of imported wood, paints, and copper has risen.
Source: BCIS
The S&P Global UK Construction PMI survey reported that, despite increased cost burdens for material producers, a weakening demand for construction products and materials has limited suppliers’ ability to pass increased costs on.
This reflects warnings from industry bodies such as the Mineral Products Association whose Q3 survey showed that sales of heavy-side construction materials remain at “crisis levels.” Extending a long period of decline, sales of ready-mixed concrete were 12.0% lower than a year earlier, and asphalt volumes remain below 2024 levels.
If the construction pipeline rebounds significantly, boosting demand for products, producers may be better positioned to manage cost pressures and raise material prices.
Labour costs
According to the Office for National Statistics, the average weekly earnings in construction reached £826 in October, a slight increase compared to the previous month, and a 3.4% increase annually. The annual rate has slowed significantly since recording 9.5% in quarter 1.
Concerns over workloads and rising payroll costs led to further reductions in staffing levels in November. The pace of job shedding was the steepest in more than five years, according to S&P Global. Data from the ONS shows that the construction workforce has fallen by 2.2% in the last year, a loss of 50,000 people.
Despite advice from the Construction Industry Training Board that the industry needs to recruit an additional 47,860 people a year, job vacancy numbers have softened markedly from their recent high in January 2025. This suggests that companies are nervous about recruiting until they have a secure workload to support a larger workforce.
Recent Labour Force Survey data from the ONS has been challenging due to declining response rates, so caution is advised when interpreting labour market figures. Nevertheless, the construction’s labour shortage remains clear, and securing skilled workers is likely to become an increasing pressure as output grows.
What does this mean for our TPI forecast?
While market surveys highlight weak demand, high interest rates, and regulatory constraints as key limiting construction activity, well-funded and viable projects continue to move forward.
We have maintained our view for Tender Price Inflation despite the recent weakening in 2025, as our index is an average across several dynamic sectors. However, the balance of labour pressure and the possibility that material prices could move needs careful monitoring if the pipeline improves.
Figure 4:
Tender price inflation: annual percentage changes
Source: Turner & Townsend survey
Our forecasts are representative for the UK as a whole and inflation may vary by project size, value, procurement route and region. Projects need to be assessed on an individual basis and may not always align to our central scenarios. For further assistance on cost assurance and inflation analysis in your area, please contact Turner & Townsend.
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