The first quarter increase resulted in 2.3% annual growth in the BCIS All-in Tender Price Index, down from a peak of 10.3% seen in the second quarter (Q2) of 2022.
BCIS chief economist David Crosthwaite said: “Tender price movement in the first quarter of 2025 has somewhat bucked the trend of price inflation accelerating at the start of the year.
“From the panel discussion, it’s clear that ongoing economic uncertainty is impacting activity. Many firms and investors are waiting to see what happens with the next phase of the government’s spending review, due in June.”
One-third of panellists reported the desired number of tenderers were found after searching in the last quarter, but a higher proportion (42%) said contractors were more eager. This was a slightly more positive picture than the panel reported in the final quarter of 2024.
Looking at their anticipated pipeline of projects over the next 12 months, one-third of the TPI panel reported it was unchanged, while one-quarter said it had reduced slightly and a further one-quarter said it had increased slightly. A total of 17% said it had increased significantly.
Dr Crosthwaite said: “Panellists reported that the impact of insolvencies is being felt in the market and that the combined effect of challenging and uncertain financial conditions, disruptions in supply chains, and labour shortages has led contractors to become more risk-averse, particularly on bigger projects.
“How much the planned increase to employers’ National Insurance contributions will impact firms will depend on the proportion of directly employed workers.
“Our panellists suggested they are looking at average cost increases in the range of 0.7% to 1.0%, though this will vary by sector. We’re forecasting a 2.5% increase to the BCIS Labour Cost Index in April, compared with March.”
The BCIS panel for Scotland estimates that building tender prices north of the border rose by 0.9% in the first quarter, compared with Q4 2024.
Dr Crosthwaite said: “Of the panellists who said there is differential movement in Scotland between projects of different sizes, they said larger projects are typically attracting higher proportions of overheads and profit, while projects below a value of around £5m were said to have slightly higher cost movement.
“All of the respondents said there was differential movement between mechanical & electrical (M&E) work and building work, with labour constraints again cited among the causes.
“They agreed that it’s still a struggle to get tenders back for M&E packages and there doesn’t seem to be an appetite for smaller contractors to scale up. Because of this, there’s still a restricted marketplace in Scotland, with limited capability for firms to take on bigger projects.”
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