TENDER PRICE INFLATION (TPI)
Our view on pricing
Overall UK construction output is falling and expected to worsen. Construction growth has been consistently weak for some time. Despite this, the cost of materials has continued to climb. Tender price inflation is increasingly disconnected from overall construction output. Rather than being driven primarily by construction demand, current pricing reflects tariffs, commodity markets, geopolitical disruption, regulatory change, risk allocation, and margin protection across the supply chain.
The last time that the construction market experienced cost increases at a time of falling output was in 2013 as the UK emerged from the global financial crisis and the double-dip recession, and the industry’s sights were set on the next tranche of work that was about to start. Expectations of imminent workload growth encouraged margins to grow in tenders, pushing overall inflation up due to the compounding effect of margin increases throughout the supply chain.
Today’s market, however, is not driven by the same expectations. Construction inflation is being driven by price pressures outside of the UK construction market as well as attitudes to risk. For example, the demands in manufacturing, tight supply, and investor actions around tariffs have all pushed the price of copper to significant levels over the past few years. Global conflicts have made supply chains uncertain, with logistics concerns sometimes limiting price validity to a few days. Energy price rises have increased the cost of manufacturing and delivery. All of these are exerting pressure on materials before we consider the impact of construction demand.
Average tender price inflation is currently in a relatively balanced position. On one hand, low construction output is helping to restrain the overall rate of inflation; on the other hand, busy sectors which are not benefiting from this easing are likely to experience higher inflation. In addition, the steel tariffs which were introduced in July 2026 along with higher energy prices have increased the cost of steel which will push inflation higher for projects that rely heavily on steel.
Figure 11:
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. *After 2027, our forecast returns to the long run average
Inflation is only part of the story
Over the last decade there have been many once in a lifetime events. While the events themselves have been varied, construction output data shows that the results are alike; slower decision making, more cautious investment, and a reassessment of project expectations.
Tender price inflation is often one of the most scrutinised figures on construction projects. However, overall cost growth extends beyond inflation alone. Project-specific and wider market pressures - including regulatory change, evolving tenant or user requirements, procurement approaches, or market appetite - are all significant factors that contribute to rising costs.
For example, revisions to fire and acoustic requirements have forced changes to specifications which has driven up the cost of internal walls significantly. The need for more sustainable and less carbon intensive materials has impacted prices too. Shifts in market behaviours have made PCSAs, design validation, bonds and retention more commonplace, all of which add cost. Extended programmes driven by uncertainty have led to lengthy pre-construction periods and greater contractual risk. Whilst all of these can substantially increase the cost of a project as time passes – especially if not accounted for at the outset – but they are not inflation.
Some of these factors fall within the project team’s sphere of influence, whilst others do not (Figure 12). Market volatility and a conservative approach to risk can amplify the impact of certain factors. The way to navigate this volatility is to be clear about what is fundamental to the project’s value proposition and what can be proactively managed. Success emerges where these two areas align.
Figure 12:
The cost escalation spectrum – from market forces to client choices
Source: Turner & Townsend survey
Moving projects forward
In today's market, successful project delivery is increasingly determined by certainty, preparedness and market confidence rather than ambition alone. Projects that progress from concept to completion typically demonstrate secure funding, a clear and compelling business case, mature design development, balanced risk allocation and early engagement with the supply chain.
Together, these characteristics provide contractors, investors and stakeholders with the confidence needed to commit, improving procurement outcomes, strengthening commercial viability and increasing the likelihood of successful delivery.
As market conditions remain selective, project teams that invest in these fundamentals will be best placed to maintain momentum and turn plans into project
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