Q2 2025
Tender Price Indicator
The UK construction sector enters mid-2025 with significant uncertainty and a mixed inflationary backdrop. Despite some easing in materials costs and signs of stabilising input inflation, tender pricing remains under upward pressure due to structural labour constraints, rising compliance costs and selective contractor behaviour. Delays in project conversion, a softening economic outlook and policy-driven cost escalations are compounding market fragility and limiting the pace of recovery.
Economic forecasts have weakened amid geopolitical and trade policy pressures: the Bank of England now expects GDP to grow by just 1% in 2025, with inflation set to remain above target until 2026. Although base rate cuts are underway, monetary easing is expected to proceed cautiously, and confidence-sensitive sectors—particularly residential and private commercial—remain subdued. Public sector workloads are providing a degree of stability, particularly in infrastructure, healthcare and regulated utilities, but delivery remains slow and funding pipelines inconsistent.
Contractors continue to adopt a defensive posture. Our latest TPI survey suggests that Tier 1 and Tier 2 firms are prioritising risk management over volume, pricing in prolonged lead times, wage inflation and delivery risk. While some sectors are experiencing increased competition, this is largely reflective of reduced opportunity volumes rather than a return to aggressive bidding. Capacity is constrained in specialist trades and retrofit sectors, while overhead recovery pressures are pushing preliminaries higher—particularly on complex or labour-intensive projects.