Civil engineering costs are set to rise by 16 per cent over the next five years to 4Q 2029, driven mainly by increasing labour costs.
Over the same period, civil engineering tender prices are expected to increase by 22 per cent according to the latest forecast from the Building Cost Information Service (BCIS).
Dr David Crosthwaite, chief economist at BCIS, said: “Infrastructure projects, by their nature, require long-term planning and delivery, meaning there are no quick fixes.
“However, greater government clarity could help to restore confidence in the sector.
“The Lower Thames Crossing, for instance, remains in limbo. Despite being a critical transport project, it has yet to receive final approval, with Chancellor Rachel Reeves recently saying it will need to be funded by private finance.
But securing investment takes time, and no investor will commit without a definitive green light from the government.
“If ministers are serious about revitalising infrastructure, decisive action is required. Without firm commitments and project approvals, the industry risks further stagnation at a time when clear direction is urgently needed.”
BCIS has formed a Civil Engineering TPI panel to advise on the latest movement in tender prices. Comprised of cost consultants from firms involved in multiple civil engineering tenders in the UK, the panel also provides commentary on conditions affecting pricing levels on civil engineering projects.
The panel agreed an average increase of 1 per cent in the first quarter of 2025, with annual growth at 3 per cent.
Dr Crosthwaite said: “Like in other sectors, civil engineering clients are waiting to see what happens with the second phase of the government’s spending review, due in June. Until then, there continues to be uncertainty in the market.
“Panellists said that, although there is positive sentiment in the sector, the point at which that is expected to convert to activity keeps moving back. Whereas there was an expectation at the end of last year that output would increase from the beginning of the year, they’re now talking about the latter half of this year at the earliest.”
Contractors’ appetite to tender for civil engineering projects was reported as fairly flat with some sub-sectors busy with constrained supply chains.
Dr Crosthwaite said: “Water, sewerage and electricity generation spending are expected to kick in later this year, so we’ll see increased pressure in those areas.
“Panellists also reported that they are starting to see some price rises feeding through following the announced changes to employers National Insurance contributions.”
New work infrastructure output declined by 9.3 per cent in 2024 but is set to return to growth from this year. Output in the sector is forecast to rise by 17 per cent over the next five years.
Dr Crosthwaite added: “Future output levels will be bolstered by proposed new work in the energy and water sectors, alongside ongoing work on HS2, Hinkley Point C, and offshore wind developments. In addition, the commitment to build the HS2 link between Old Oak Common and Euston is likely to boost output when construction starts in 2026.”
For more information about BCIS, please visit: www.bcis.co.uk.
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