It’s expected that building costs will increase by 14% over the next five years, the Building Cost Information Service (BCIS) has predicted.
As such, tender prices should rise by 5% over the same period.
There will likely be more activity, as total new work output is forecast to grow by 12% between 2026 and 2031.
Dr David Crosthwaite, chief economist at BCIS, said: “Conditions in the UK construction sector at the start of 2026 were mixed, with some signs of improving sentiment before geopolitical developments unsettled energy markets and clouded the outlook.
“Industries such as construction are particularly exposed to such shocks given their reliance on fuel, transport and energy-intensive raw materials.
“As a result, the cautious optimism that characterised the early part of the quarter has increasingly been overshadowed by concerns over supply disruption and cost pressures.
“At this stage it remains too early to fully assess the economic implications. However, a prolonged period of elevated energy prices could sustain wider inflationary pressures and delay the pace of monetary easing.
“With interest-sensitive sectors such as residential construction already facing subdued demand, financing conditions will remain an important factor shaping activity over the coming months.”
Labour is the primary driver of project costs, as prices are driven up by skills shortages.
