Movement in contractors’ construction costs in Scotland

Scottish construction costs rise as contractors face unpredictable pipeline

Construction input costs in Scotland increased by an average of 4.25% in the year to 1Q2026, and by 1.00% on the quarter, according to the latest meeting of the BCIS Scottish Contractors Panel.

The annual increase was lower than the 4.5% reported in 4Q2025, while the quarterly movement remained unchanged.

The panel, which comprises representatives from major contractors across Scotland, was established by BCIS to monitor quarterly cost movements — specifically the prices agreed between main contractors, suppliers and subcontractors.

It also provides insights into the factors affecting costs on construction projects.

Project pipeline

Commentary on the project pipeline was mixed at the panel’s latest meeting.

While the overall pipeline has not reduced, members agreed it has become less predictable and less visible. Market growth varies by location, with energy and residential projects seeing strong performances in the north of Scotland.

60% of panel members said they expect their pipeline of projects to decline slightly compared with the previous 12 months.

The upcoming Scottish election is also creating uncertainty and is expected to delay key announcements, including potential investment in schools.

Appetite to tender

Panel members cited programme delays, the re-tendering of projects and constrained budgets as key factors discouraging subcontractors from tendering.

In some cases, they said budgetary due diligence is not undertaken until later in the project, which can undermine early cost planning and require contractors to revisit pricing with the supply chain.

The panel suggested that agreeing budgets and designs with clients earlier in the process could help reduce the need for re-tendering or value engineering.

Subcontractors are aware of these risks and often wait until designs are finalised before submitting tenders.

Members also highlighted that providing bills of quantities helps secure engagement from the supply chain. However, this skill is reportedly declining, with more graduates trained in construction management rather than measurement.

Other challenges

The panel noted that inflation risk is rarely shared on projects. Single-stage tendering is generally viewed as a last resort, as it limits opportunities for collaboration and risk sharing.

Mechanical and electrical (M&E) costs were reported to have plateaued, although at levels higher than previously seen.

Labour costs are also higher outside Scotland’s central belt, partly due to workers relocating for opportunities, creating resourcing pressures elsewhere.

The panel also raised concerns about Scotland’s Compliance Plan Approach, which is expected to introduce additional administrative requirements before buildings can be approved. As a result, subcontractors may need to be appointed earlier to ensure projects progress smoothly.

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Panel members:

• Iain Tosh, Morrison Construction
• Martin Poole, Ogilvie Construction Ltd
• Paul Dodd, Scottish Futures Trust
• Steven Brady, Robertson Construction
• Steven Hope, Balfour Beatty
• Steven Ramage, Morgan Sindall
• Stuart Parker, Morgan Sindall