3.17%

Budget comes and goes but cost and growth challenges remain for the UK construction industry

RLB’s tender price forecasts have shown little movement in response to the Autumn Budget. With many projects ‘waiting until budget day’, this much-anticipated fiscal event is expected to have a limited impact on construction inflation, with a marginal increase for the completion of 2025’s figures and a marginal decrease in the forecast for 2026.

The Chancellor had few new announcements impacting immediate pipeline. With notable increases in labour and material costs, 2026 will see tender prices driven by rising input costs, with a lid kept on tender price inflation through competitive bidding by contractors keen to replenish their work pipelines. The industry will respond to the government’s ‘Get Britain Building’ challenge, but it will undoubtedly take effort for many of our clients to navigate the economic headwinds that persist.

As existing build-outs continue in the UK, attention will drift to replacement workload, and a glance at ONS data will show that growth in new orders has risen significantly recently from the private industrial and, to a lesser extent, private commercial sectors – but the clear winner recently has been infrastructure, which in the last year has seen an uplift of over 24% by volume in quantity of new workload.

It could be argued that the uplift in heavier engineering-type projects could alleviate some of the pressures on the labour pool, but the real question remains as to whether work referenced in the Budget comes to fruition, and when.

Despite the new orders, ONS data shows sluggish total volume of actual output (less than 1.5% increase year on year), while the Office for Budget Responsibility’s forecasts for GDP growth into 2026 have been downgraded from 1.9% to 1.4%.

At a regional level, markets around the UK are exposed to different sectors and may take cheer or solace in the Budget accordingly. However, stand-out announcements for the regions include the allocation of £500m for the Mayoral Revolving Growth Fund, and £820m for the Youth Guarantee scheme which could ease skills shortages in the longer term.