Movement in contractors’ construction costs in Scotland

Construction input costs in Scotland increased by an average of 4.5% in the year to 4Q2025, and by 1.0% on the quarter, according to the latest BCIS Scottish Contractors Panel.

The annual cost movement was up on the figure reported in 3Q2025 while the quarterly cost movement stayed the same.

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.

Appetite to tender and project pipeline

Panellists agreed there has been continued reluctance among contractors to engage in single-stage tendering.

Frameworks and negotiation were cited as the preferred procurement routes by panellists who described their appetite to tender as very selective.

Panellists also said there have been more opportunities in the marketplace for subcontractors which is giving the latter more choice.

Panellists agreed the project pipeline looked slightly more optimistic in 4Q2025 than in the previous quarter, although they cautioned against a glut of projects arriving at once.

Labour supply

Labour shortages continue to pose a challenge for Scottish contractors.

Panellists reported difficulties in securing resources for big projects stating that some projects at a certain value are not feasible.

The availability of experienced and competent labour can lead to longer programme durations and productivity has been low.

Panellists said the situation has not been helped by the shortage of college places to train required construction workers or the long-term lack of investment in the sector.

Cost challenges

According to the panel, materials inflation is currently a bigger challenge than labour inflation.

Panellists also noted the significant cost premiums in remote projects for work subsistence, extended programmes and the transportation of materials.

They referenced the faster increase in M&E costs compared with other trades too.

Logistics barriers

Other issues highlighted by the panel included the expectation for contractors to bear design development risks despite their lack of access to the design team in single-stage design and build projects.

Panellists also said tender periods for design and build schemes are unrealistic and suggested this can lead to supply chain disinterest or cost premiums to cover the risks.

Promisingly, panellists said the bottleneck linked with Scotland’s National Planning Framework 4 has eased and that the education and public and private housing sectors seem healthy.

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Panel members:

• Alan Wilson, Select
• Garry Shand, Hutcheon Services
• Iain Tosh, Morrison Construction
• Martin Poole, Ogilvie Construction Ltd
• Paul Dodd, Scottish Futures Trust
• Brian McQuade, Robertson Construction
• Steven Hope, Balfour Beatty
• Stuart Parker, Morgan Sindall