Movement in contractors’ construction costs in Scotland

Construction input costs in Scotland increased by an average of 3% in the year to 1Q2025, and by 0.75% on the quarter, according to a contractors’ panel established by the Building Cost Information Service (BCIS).

The BCIS Scottish Contractors Panel was formed to help monitor quarterly movement in costs, i.e. the prices agreed between the main contractor and suppliers and subcontractors. Comprised of representatives of major contractors in Scotland, it also provides insights on the factors affecting costs on construction projects.

Appetite to tender

Panellists reported the desired number of tenderers (sub-contractors) were found after searching or were more eager.

In terms of their own tendering, panellists commented that a slowdown in public sector procurement had increased their interest in other markets and that framework and two-stage tendering are preferable to single stage.

Pipeline of projects

Panellists reported a fairly even spread of expectations for their pipeline of work over the next 12 months, similar to the picture in 4Q2024.

They said it was dependent on the sector – that purpose-built student accommodation enquiries, for example, have increased significantly, but there isn’t enough capacity for all to be realised, so some such projects will not ultimately proceed.

Panellists said it’s difficult to see where the public sector pipeline is coming from. Many projects remain in the holding pattern they were in last year.

Conversion from pre-construction to construction was said to be a major issue and a challenge for main contractors and the supply chain, especially when projects are cancelled and there is no compensation for spend in the pre-construction phase.

Logistics challenges

Panellists commented that client budgets can be unrealistic for the expected scope of works and this can cause project delays. Site availability and a constrained supply chain were also cited as impacting on projects.

There were also reports of cost increases in the supply chain and with merchants and wholesalers, not so much because of materials costs, but because of increased costs they are facing with, for example, staffing, rent and energy.

Skills shortages

Panellists again reported challenges around growing the workforce. Even where there’s no issue with recruiting entrants for apprenticeships, for example in the electrical sector, there is a problem with the number of businesses willing to take on apprentices because of the associated cost. Shared apprenticeship schemes, where the cost of employment and training can be shared between more than one employer, or between an employer and training provider, could be a viable option.

Differential cost movement

Panellists who said there is differential cost movement between regions said cost increases are higher outside the M8 corridor, and that the south and north carry at least a 5% premium.

Where differential movement was reported between M&E (mechanical and electrical) work and building work, panellists pointed to a scarcity of labour and higher materials costs, as well as the costs associated with sustainability requirements and government initiatives. Panellists reported a lack of organisations able to contract at scale on bigger projects.

Impact of the Autumn and Scottish budgets

No real impact from recent budgets was reported by panellists. They said that while additional funding commitments were contained within the Scottish budget, much of it wasn’t actually new money, rather reinstatement of what had been cancelled previously.

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Panel members:

• Stuart Parker, Morgan Sindall
• Garry Shand, Hutcheon Services
• Brian McQuade, Robertson Group
• Alan Wilson, SELECT
• Iain Tosh, Morrison Construction
• Martin Poole, Ogilvie Construction
• Paul Dodd, Scottish Futures Trust