Movement in contractors’ construction costs in Scotland

The BCIS Scottish Contractors Panel comprises representatives from major contractors across Scotland and monitors quarterly cost movements and market conditions. The panel also provides insight into factors affecting construction project costs and procurement activity.

Commentary in 2Q2026 was collected through a Delphi survey and a joint meeting with the BCIS Scottish Tender Price Assessment Panel.

Scottish contractors report rising cost pressures in second quarter

Construction input costs in Scotland increased by an average of 5% in the year to 2Q2026, and by 4.5% on the quarter, according to the BCIS Scottish Contractors Panel.

The annual increase was higher than the 4.25% reported in 1Q2026, while quarterly growth accelerated from 1% in the previous quarter. The findings reflect pricing agreed between main contractors, suppliers and subcontractors across the Scottish construction supply chain.

Panellists reported that contractor appetite to tender was broadly unchanged in the second quarter, with activity continuing to focus on two-stage and negotiated tendering approaches.

Three-quarters of the panel reported a reduction in the volume of projects expected to go to tender over the next 12 months, compared with 60% in 1Q2026. One-quarter reported a slight increase in pipeline activity.

Panel commentary suggested that conflict in the Middle East is contributing to cost pressures across several construction trades and product groups.

Panellists reported impacts on trades reliant on resources produced through energy-intensive manufacturing processes, including steel, aggregates, plasterboard, insulation and glass.

Fuel-dependent activities such as groundworks, cranage and excavation, all well as trades dependant on imported goods impacted by availability constraints and higher transport costs, were also identified as subject to cost pressures.

Panellists raised further concerns about insolvency risk within parts of the supply chain where businesses are operating under fixed-price contracts during periods of fluctuating costs.

On subcontractor appetite to tender, the panel said concerns over project progression, the quality of pricing information and tender timescales were among several factors discouraging participation in tender opportunities.

The panel also cited unrealistic project budgets and repeated tender exercises as barriers for subcontractors and suppliers.

Panellists suggested that greater budget certainty and clearer project information could support engagement from the supply chain. Two-stage tendering was highlighted as an approach that may provide clearer visibility of competition and more structured pricing information, helping reduce the resource required to assess and price risk.

Providing sufficiently detailed bills of quantities was also identified as a way to improve engagement from subcontractors and suppliers.

Dr David Crosthwaite, chief economist at BCIS, said: ‘Feedback from the panel and the substantial quarterly increase in contractor-reported input costs suggest that project pressures in the Scottish construction sector are broad-based, with concerns extending beyond material pricing into procurement, tendering activity and supply chain resilience.

‘It is important that clients and businesses involved in new work proceed with care. Historic insolvency data shows that several months after Russia’s invasion of Ukraine there was a rise in insolvencies among firms delivering specialised construction activities in Scotland.

‘These firms typically operate on a subcontract basis and can be more exposed to pricing volatility because of working patterns and payment structures. During periods of increased cost volatility, robust financial due diligence, realistic budgeting and clear communication across the supply chain become increasingly important, both for the resilience of smaller suppliers and the continuity of construction activity.’

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Panel members:

• Alan Wilson, SELECT
• Garry Shand, Hutcheon Services
• Iain Tosh, Morrison Construction
• Martin Poole, Ogilvie Construction Ltd
• Steven Brady, Robertson Construction
• Steven Hope, Balfour Beatty
• Steven Ramage, Morgan Sindall
• Stuart Parker, Morgan Sindall