Executive Summary
A national perspective on market trends and activity in UK construction
In the Executive Summary, we present and discuss national statistical data alongside our tender price forecast data to give a detailed overview of construction activity and market sentiment within the context of the wider UK economy.
MACRO ECONOMIC CONDITIONS
Output of construction industry in line with the UK economy’s slow growth
The OBR’s latest forecast of UK GDP growth for 2026 continues where it left off in 2025: revised down to 1.1%, it’s no surprise that the overall output of the UK construction industry is where it is. The forecasts of other institutions are similar, with the OECD and IMF predicting growth of just 1.2% and 1.3% respectively.
The end of 2025 brought the Autumn Budget which saw some confirmation of existing knowns (numerous infrastructure projects), increases in national wage rates, and increased levels of mayoral and regional funding. The Budget was relatively late in the year, which arguably contributed to a Q4 slowdown in new construction. With decision-making pushed into the new year, it is hoped that Q1 figures will give more cause for optimism.
The OBR’s CPI forecast for 2026 is 2.3%, with both the OECD and IMF showing an expectation of 2.5% – a more consistent level of inflation compared to previous years will be a most welcome steadying of the ship. Of course, this is predicated on external factors that can change quite suddenly, including all manner of geopolitical uncertainties.
Wage and salary increases peaked in 2025 but the OBR expects these to settle down over 2026 and beyond. Unemployment figures in the UK, however, are expected to rise marginally over 2026, with the OBR predicting 5.3% unemployment versus the IMF’s estimate of 4.7%.
CONSTRUCTION PIPELINE PROSPECTS
Market outlook boosted by rise in new orders for infrastructure and housing projects
New orders in 2025 were up 12.6% on 2024, compared to a modest increase of 3.4% the year before. This is clearly a positive sign and one which will boost market sentiment as we continue into 2026. The outlook is further bolstered by the increase of more than 46% in new infrastructure projects and the nearly 41% rise in new orders for public housing projects.
In the private sector, however, commercial projects only show a 4% increase in new orders, while private housing new orders have dropped by over 10%, a sign perhaps of the continued lack of affordability for new homes subduing demand.
Delving further into the data, and looking for more positivity, the last quarter of the year did see a drastic increase of around 13% in private housing new orders on the quarter before, strengthening hopes that the industry has turned a corner and is heading in the right direction.
INPUT COSTS
Projected fall in input costs will ease pressure on contractors
Input costs, according to the BCIS General Building Cost Index (GBCI), showed a final year uplift of 4.15%, with an expectation over 2026 for this to drop back down to approximately 2.7%. As in previous years, the 2025 figure exceeded the BCIS Tender Price Index (TPI) of 3.01%, adding increased pressure to contractor margins.
Cost increases have been pushed by a mixture of national and global drivers, notably rises in National Insurance, National Minimum Wage and National Living Wage, but also material cost increases driven by geopolitical uncertainty and where demand has increased for raw materials such as copper, steel and concrete.
Interestingly, the BCIS shows its TPI and GBCI flipping in 2026, with costs (GBCI) set to increase by 2.72% and tender prices (TPI) rising by 3.41%. This could be seen as some small relief to main contractors who have struggled on minimal margins in recent years. Our own view is that tender prices are being driven at different rates by sector and that some contractors will continue to struggle into 2026.
This reduced pace of input price rises is also driven by the wages and salaries expectation from OBR dropping down to 3.5% for the year, then again down to 2.9% for 2027, matched by an anticipated reduction in overall retail prices.
TENDER PRICE FORECAST
Marginal increases in tender prices forecast but inflation will vary across the UK
RLB’s Tender Price Index forecast for 2026, which is weighted by ONS data for regional new orders volumes, shows a greater increase for 2026 than for 2025. Our final weighted average uplift for 2025 was 3.03%, dropping slightly from our forecast of 3.17% for the previous quarter.
In Q1 2026, we calculate an uplift of 3.45%, marginally higher than what we had previously forecast, a trend which continues through future years. Our figures for 2025 and 2026 – 3.03% and 3.45% respectively – are very similar to those calculated by BCIS (3.01% and 3.41% respectively).
The marginal increase to future calculations is based somewhat on a more optimistic picture of 2026 now that we are well into the year, with all years up to 2029 increasing a little closer to 4% rather than 3% but still in the same region.
Compared to BCIS TPI, RLB outstrips it over 2027 and 2028 by up to 0.5%, but 2029 shows quite a decrease in uplift from BCIS, one not reflected by the data gathered by our regions.
Our averages provide a broad overlying average for the UK, but our regional analysis shows how this is anticipated to vary across the country. Our experts in each region input local data into these figures and this shows that some sectors in some markets are performing at different rates to others.
RLB Tender Price Index uplifts published in CMI Q4 2025 vs published in CMI Q1 2026
The chart above shows an average of RLB's regional tender price forecasts for the respective years, weighted by regional new orders volumes of workload for the year to November 2025 (ONS).
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