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
Investment held back by uncertainty over UK economic outlook
The Bank of England has been reducing interest rates slowly since August 2024, with the most recent, in early August 2025, taking the rate back to 4%. Ordinarily, that would stimulate the market at least somewhat, but in the current geopolitical and global policy uncertainty, ensuing growth remains to be seen. That uncertainty appears to be flowing through into the economy’s performance over the remainder of the year and on into 2026.
Generally, GDP forecasts have been reduced slightly, CPI figures have risen, and unemployment percentages have expanded. However, all these changes, though consensual across key commentators, are still relatively minor. Despite persistent price pressures from energy costs and general consumption, interest rates are projected to continue heading downwards, which ought to clarify investors’ thinking. Even though unemployment forecasts have shifted upwards, current figures still represent historically low levels of unemployment, as is the case in the construction sector.
Central government continues to tread a fine line between targeted spending and constraint on welfare expansion, which could be affected by the outcomes of the Autumn Budget. For construction, output and new orders figures are reflective of the impacts of the uncertainties noted above, even though there are significant upcoming increases in infrastructure spending.
Key economic forecasts
CONSTRUCTION PIPELINE PROSPECTS
Skills gaps will be exacerbated if sector returns to growth
At the mid-point of the year, the volumes of new orders across the industry are showing a fall of 2.95% year-on-year. Within that, however, ‘Other New Work – Infrastructure’ is up by almost 42% year-on-year. This reflects a significant issue in the industry, which continues to flag labour availability concerns even in the face of the ongoing stasis in most work sectors.
The overall figures matter, of course, as they depict the work availability in the country as a whole, but if labour-intensive workload is relatively static and we still have shortages of skilled labour, then serious bottlenecks may be expected should the market take off.
The Construction Industry Training Board projects a need for 48,000 new workers per year for the next five years, a significant challenge when you consider the training inputs required to educate and upskill all these workers. In addition, the industry needs to factor in the initial efficiency of new recruits compared to the experienced professionals they will be replacing.
Even if we are at an inflection point now, and forecasters such as PwC are projecting a return to growth through to 2027, something must give if even at this low point we have labour shortages.
INPUT COSTS
Input costs forecast to fall despite uplift in wages and salaries
Despite the advent and then the apparent dissolution of the threat of Trump’s most punitive tariffs on the UK, the first half of the year has been affected more by general unease in the markets than by actual cost effects of anything tariff-related. In the absence of retaliation from the UK, any additional tariff costs on goods into the US have virtually no effect on costs here.
In fact, it could be argued that the imposition of tariffs on UK goods to the US could have the effect of reducing costs here at home, as such exported goods would be seeking markets in which they would not be impacted by buyers having to pay to import into the US.
More specifically, BCIS has trimmed its 2025 forecast for input costs from +4.25% to +3.80%, a not insignificant reduction, with only +2.90% forecast for 2026. Given that the Office for Budget Responsibility (OBR) is projecting an uplift in wages and salaries of 5.20%, due to bargaining agreements and the increase in National Insurance, the overall cost index is now showing a very tight figure, which reflects the currently static nature of the workload market generally.
TENDER PRICE FORECAST
Lack of new orders in construction is squeezing tender prices
On a location-by-location basis, there is only very little change in RLB’s forecasts for tender price movements this year and in 2026. Where change has arisen, the general direction has been toward tighter figures.
In RLB’s tender price forecast model, regional variations are weighted by the region’s overall volume contribution to the ‘workload pot’. RLB’s view corresponds with that of BCIS in terms of the national ‘average’ having been trimmed since the turn of the year.
As noted in this report, input cost forecasts have been similarly squeezed, but neither situation is particularly healthy in the long term. BCIS figures are showing the same adjustments, and the rationale can be followed through to the wider UK economy, which is currently not generating much in the way of growth figures.
Limited new orders in construction serve to accentuate the squeeze on tender prices, but also to encourage tight bidding, with all the downstream effects that can flow from urgency in acquiring new work.
Marrying RLB’s latest Market Activity Cycle data for each UK region with the respective tender price movements demonstrates how sectors within the market are contributing in their various locations, even though overall any increases in outturn figures are small.
Looking ahead, our forecast that tender price figures for next year will be consistent with the current year is irrespective of the prospect of significant new government-led work coming to the market.
RLB Tender Price Index uplifts published in CMI Q3 2025 vs published in CMI Q2 2025
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 June 2025 (ONS).
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