Introduction
Welcome to the Q2 2026 edition of Construction Market Intelligence, RLB’s insightful, up-to-date guide to construction activity around the UK incorporating our quarterly tender price forecast.
The RLB Weighted Average Tender Price Index forecast uplift for 2026, as at Q2 2026, is:
Previous quarter’s forecast for 2026: 3.45%
Anticipated recovery of UK construction sector pushed back by uncertainty over Middle East crisis
This edition of Construction Market Intelligence reflects a shifting and increasingly uncertain market environment, shaped by evolving global and domestic pressures. While the latest Office for Budget Responsibility (OBR) data has yet to catch up with the most recent developments, notably the crisis in the Middle East, there is already an influence on inflation, sentiment and forward expectations across the construction sector.
Revised macroeconomic forecasts show a slowdown in recovery, with recent projections from the OECD and IMF indicating a weaker outlook, with GDP forecasts revised down to 0.7% and 1.0% respectively.
At the same time, inflation expectations have increased notably, with CPI now forecast at up to 4.0%, suggesting that price pressures will persist for longer than previously anticipated. This is feeding through into higher wage growth and cost expectations, adding to the challenge faced across the industry.
Against this backdrop, construction activity has shown mixed signals. The latest quarterly data indicates a softer start to 2026, with new-build output falling compared to Q4 2025, and new orders declining at a point in the year when an uplift would typically be expected. However, resilience in refurbishment and maintenance activity, alongside a late increase in monthly output in March, points to a degree of underlying stability, albeit at subdued levels of growth.
Cost pressures are becoming more pronounced. Input cost forecasts have been revised upward, with the BCIS General Building Cost Index for 2026 increasing to 3.87%, driven by material price volatility and sustained wage growth. While individual material price increases are often running ahead of this trend, in many areas supply chains are absorbing the impact in response to slowing demand.
In parallel, RLB’s Tender Price Index has also been revised upward to 3.98% for 2026, reflecting a difficult pricing environment as contractors respond to increased cost risk and uncertainty.
Beyond our headline inflation forecasts, we are seeing increasing divergence in forecasts based on project sector, size and geography. Where pipelines are resilient, input costs are pushing tender prices significantly ahead of our all-in forecast; where pipelines are softening, there is increased absorption of input costs through the supply chain.
Taken together, the data suggests that the recovery anticipated for 2026 is being pushed further out, with heightened inflation, weaker growth and reduced pipeline momentum creating a more challenging near-term outlook for the UK construction market.
How will Middle East crisis impact the UK construction industry?
As the data published in this report confirms, the Middle East crisis is starting to impact the UK construction market by creating uncertainty around work pipelines and increasing the risk of higher input costs and tender prices.
If you work in construction procurement, where should you be focusing your attention right now and what proactive steps should you be taking to reduce risk to the viability and completion of projects due?
In this informative article, Paul Beeston, Head of Industry and Service Insight for RLB in the UK, provides answers to some of the most pressing questions being raised by investors and developers, as well as practical advice for delivery teams.
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