Construction inflation in 2024: what are industry professionals forecasting?

While shoots of recovery may be visible in some sectors, like reductions in mortgage rates that will hopefully boost consumer demand in housing, there’s no doubt that the stagnating economy will continue to challenge the construction industry in 2024. 

We polled more than 500 construction professionals from a range of disciplines, particularly cost consultants and surveyors, to find out how they expect the sector to fare over the next 12 months. 

When asked about their workload in 2024, 42% said they expect it to stay the same, while 36% anticipated a rise. Only 13% said they were expecting a fall in workload in the next year. 

Overall materials cost inflation has cooled considerably in recent months, with annual growth in the BCIS Materials Cost Index now in negative territory, which is where we expect it to remain until the latter half of the year. 

Some prices remain historically high, though, and there is of course huge variation between materials. Some products, particularly those with energy-intensive manufacturing processes, are still seeing cost increases.

We asked our respondents what they thought would happen to materials costs in 2024. 42% said they thought they will rise, while 34% said they expect them to stay the same. 13% said they were expecting them to fall, while 11% said they didn’t know. 

With materials inflation falling away, labour has become the more significant cost driver on projects. Annual growth in the BCIS Labour Cost Index is around 7%, which we’re expecting to increase slightly during the first half of the year, before easing to around 6% by the end of 2024. 

The majority of our polled professionals – 59% – said they expect labour costs to increase in 2024, with a further 29% saying they thought they would stay the same. Just 6% are predicting a fall in labour costs, and 7% said they didn’t know. 

Labour shortages and skill gaps have been reported across the industry, though the issue is likely being masked to an extent by decreased demand currently. We asked the construction professionals what they thought would happen to labour availability in 2024. 

38% said they expect availability to stay the same, while 29% said they expect it to fall, and 23% said they thought it would rise. The remaining 10% said they didn’t know. 

BCIS Chief Economist, Dr David Crosthwaite said: ‘It’s encouraging to hear that more than three-quarters of the construction professionals we polled are anticipating their workload to either stay the same or increase in 2024 given the backdrop of declining activity we have seen, especially in new work. 

‘This poll also shows how different experiences can be across the industry. Projects will fare differently on a cost basis, depending on input resource choices and the context, like location. It’s always useful to be able to track input costs against project specifics.’ 

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