Movement in contractors’ construction costs in Scotland

Construction input costs in Scotland increased by an average of 3.13% in the year to 3Q2025, and by 1.00% on the quarter, according to the BCIS Scottish Contractors Panel.

Both annual and quarterly cost movements were down on those reported in 2Q2025.

The panel, which comprises representatives of major contractors in Scotland, was formed by BCIS to help monitor quarterly movement in costs, i.e. the prices agreed between the main contractor and suppliers and subcontractors.

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

Pipeline

Panellists agreed that there was little visibility of the future pipeline of work.

Reflecting on this, Dr David Crosthwaite, chief economist at BCIS, said: ‘Some of the issues seen across England and Wales appear to be happening in Scotland too. Panellists said that four or five years ago, they had good visibility of their workload years into the future.

‘Now they face a lack of visibility that, reminiscent of NISTA’s Infrastructure Pipeline, makes it hard to predict project timings and funding availability.’

Appetite to tender

Elsewhere, 75% of panellists said that procurement methods have an impact on subcontractor and/or supplier prices, with a comment on the greater cost certainty and improved risk management that come with two-stage procurement.

According to panel commentary, single-stage procurement is often a high-risk, low-reward process for contractors.

It can require substantial resources despite a slim chance of success given the ‘race to the bottom’ approach prompted by intense competition.

Logistics challenges

Statutory approvals and utilities procurement were cited by panellists as impacting on pricing.

These involve third parties and the timescales for undertaking them is often beyond the control of contractors.

It was reported that statutory approvals and utilities procurement represent the biggest, collective risk to projects from the perspectives of contractors and employers alike.

Labour supply

Panellists reported an ongoing struggle for certain trades in Scotland.

There was no consensus on whether the national labour supply was shrinking, but panellists said introducing more skills training in education is necessary to encourage young people into these roles.

Dr Crosthwaite added: ‘Responses to increasing Scottish labour supply were mixed. Some panellists felt education was the main barrier while others cited the squeezed budgets of training providers and a reluctance among employers to take on apprentices due to high costs.

‘Panellists added that for smaller construction businesses, the ROI for hiring apprentices is small. Additional labour is often only needed when these businesses are delivering large projects, and this is typically infrequent.’

Differential price movement

All panellists reported differential price movement between regions, pointing to higher competition in the central belt of Scotland in comparison with the North East and the South.

Panellists also reported higher premiums in the Scottish Highlands and Islands, although premiums from some suppliers vary depending on location and trade.

The majority of panellists also said there is differential price movement between building and M&E work, with some reporting greater fluctuation in the latter.

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Panel members:

• Steven Hope, Balfour Beatty
• Garry Shand, Hutcheon Services
• Stuart Parker, Morgan Sindall Construction (Scotland)
• Iain Tosh, Morrison Construction
• Martin Poole, Ogilvie Construction Ltd
• Brian McQuade, Robertson Group
• Alan Wilson, SELECT