Consultant predicts 5-6% tender price inflation from 2026 onwards
Arcadis has raised its tender price inflation forecast for the next three years due to a declining construction workload since June 2023.
Today, the consultant announced that resource constraints will slow recovery in the sector. Despite a fall in the value of new work, the bidding abilities of contractors are being confined by their pre-contract commitments to stalled construction projects.
According to the report, short and medium-term supply chains are being modified by these delayed two-stage procurements, minimising market competitiveness.
“Capacity issues caused by projects let on a two-stage basis create a ‘holding pattern’ where contractors are committed to resourcing uncertain projects,” said Ian Goodridge, market intelligence lead at Arcadis. “This situation leads to a paradox of falling workload and contractors claiming they are too busy, as the new work pipeline remains empty.”
Combined with weak new orders, which are 13% lower than the long-term quarterly average since 2015, Arcadis made a 5-6% prediction for building projects tender price inflation from 2026 onwards.
It also reported that an impending general election next month has so far not presented concrete signs of improvement for the construction supply chain.
Arcadis foresaw a short-term hiatus in decision-making relating to the construction sector, citing that already there is little discussion from either Labour or the Conservative party about how they plan to meet their fiscal rules.
Latest research by the Institute for Fiscal Studies found that following current projections, unprotected revenue budgets will experience cuts of between 1.9% and 3.5% per year, amounting to between around £10bn and £20bn by 2028-29.
“Political parties promise change during election campaigns, but there are few signs of improvement for the construction supply chain,” said Simon Rawlinson, head of strategic research and insight at Arcadis.
“By late 2025, with more projects and potential loss in industry capacity, conditions are set for an inflationary recovery,” he added.
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