TPI Survey Feedback

WORKLOAD

With the number of new projects in the pipeline remaining relatively flat in key sectors, contractor workloads have stagnated. G&T’s latest analysis of Tier 1 main contractor pipelines indicates slippage in forward conversion rates, with more projects sitting in feasibility or delayed pre-construction phases. This reflects a cautious investment climate shaped by macroeconomic headwinds, regulatory uncertainty and fragile client confidence.

The residential sector remains one of the weakest performers. New schemes are struggling to get off the ground as clients delay decisions amid ongoing viability challenges and uncertainty over how the Building Safety Act gateway process will evolve. Planning delays, funding constraints and protracted regulatory processes are compounding the issue.

In contrast, activity in commercial and life sciences sectors is more stable. Several clients are using the quieter period to reposition assets—especially legacy offices—through refurbishment and fit-out projects aimed at meeting evolving ESG standards and anticipating a future uplift in demand around 2027–28. While new-build commercial office starts remain subdued, investment in trading assets continues, with developers positioning portfolios for the next development cycle.

Although many contractors remain busy in the near term, this is largely underpinned by legacy workload and projects already in flight. Workloads appear secure through to mid-2026, but gaps are beginning to emerge beyond that horizon, especially where project delays have pushed planned starts back into late 2026 or early 2027.

Early signs of market softening are clearest among early-works contractors. Basement, enabling and groundworks specialists are becoming increasingly active and price-competitive, indicating a degree of underutilisation. Main contractors remain broadly selective, but there is growing evidence of firms loosening their stance—responding more positively to early-stage enquiries, proactively pursuing opportunities and offering cost advice at RIBA Stage 2 or 3 to help secure future workload.

Fit-out and refurbishment pipelines remain relatively buoyant, but base build and shell & core packages are under more pressure, with fewer large projects being brought to market. As a result, some contractors—particularly those exposed to the residential downturn—are becoming more assertive in chasing work and seeking earlier engagement to secure positions on prospective bids.

Looking ahead, the remainder of 2025 is expected to remain broadly flat in workload terms. Moderate growth is anticipated to return in 2026, but sentiment remains cautious. Most contractors are prioritising resilience and viability over aggressive growth, with the focus on maintaining pipeline continuity through selective tendering, early involvement strategies and close client relationships.

MARKET CONDITIONS

The UK construction market feels finely balanced. While broader economic conditions have shown tentative signs of stabilisation, the construction sector remains in a holding pattern—neither stalling nor surging.

Tendering activity has become more competitive, particularly outside the buoyant infrastructure sector and advanced manufacturing sectors. While pricing pressure has eased from the highs of 2022-23, underlying costs—especially labour—remain elevated, keeping margins under strain. Risk transfer and contract conditions are playing an increasingly central role in bid decisions, with some contractors opting out of opportunities deemed commercially unviable or high risk.

Workforce availability and capability remain persistent concerns, especially for key trades and specialist packages. But this is just one of several pressures weighing on contractors' operations and outlook. Recent survey feedback highlights a confluence of commercial and operational challenges—most notably higher borrowing costs, onerous contractual conditions, persistent site inefficiencies and rising compliance burdens linked to sustainability and safety regulation. These are not abstract risks: many contractors rated them as high or major threats to business performance over the next 12 months.

Rising overheads—from labour costs and logistics to compliance with evolving sustainability and safety regulations—continue to eat into margins. While material prices and lead times have broadly stabilised, strategic pressures have shifted towards risk transfer, cash flow fragility in the supply chain and a continued lack of confidence to invest in new projects.

Financial pressure across the supply chain is adding to these concerns. Construction insolvencies remain elevated and profit warnings among listed firms in the sector hit a 12-month high. Specialist contractors remain especially exposed, with delayed project starts and tight margins contributing to increased financial fragility.

While the 2025 Spending Review and National Infrastructure Strategy have delivered welcome visibility on long-term investment, programme delivery remains slow. Extended pre-construction periods, constrained client-side resources, and complex business case approvals are limiting the pace at which public sector work is hitting the market—delaying any immediate uplift in workload.

This sentiment is reflected in recent survey data. Respondents’ expectations for the next six months have shifted slightly towards caution. The majority still view market conditions as broadly stable—clustered around mid-point scores of 3 and 4—but the share selecting '3' rose from 39.8% to 49.4% between Q2 and Q3 2025, while the proportion choosing more optimistic scores declined. Fewer respondents selected ‘5’ or higher. This points to expectations of muted market activity and heightened tendering competition in the near term.

Opportunities remain—for those willing to engage early, manage risk collaboratively and adapt delivery models to evolving client priorities. The second half of 2025 will test the industry’s ability to maintain commercial discipline while remaining agile enough to respond to shifting market signals. Looking ahead, if inflation continues to ease and procurement pipelines accelerate, 2026 could mark the beginning of a more synchronised recovery.