Brace for 5% Tender Price Inflation, Report Says

Why It Matters

A 5% tender‑price jump will tighten margins for contractors and could delay or reshape flagship infrastructure projects, prompting a shift toward tighter supply‑chain collaboration and risk‑sharing across the UK construction market.

Key Takeaways

• Tender prices could rise up to 5% for UK infrastructure projects.
• Real‑estate tenders forecasted to increase 3.5% in 2026.
• Energy price volatility identified as primary inflation driver.
• £718 bn (≈ $912 bn) pipeline faces heightened cost risk.
• RICS predicts 5.6% price rise over next 12 months.

Pulse Analysis

The latest Turner & Townsend UK Market Insight for spring 2026 flags a potential 5% inflation in tender prices for infrastructure work, up from previous estimates, while real‑estate contracts are seen climbing 3.5%. The surge is largely attributed to volatile energy prices—Britain remains a net importer of gas and electricity—and the geopolitical shock of the Middle East conflict, which has already forced the IMF to slash its UK growth outlook from 1.3% to 0.8%. These macro‑economic headwinds are reshaping cost structures across the construction value chain.

Contractors are being cautioned against “premature reactions” and instead urged to deepen collaboration with suppliers, map real‑time cost pressures, and allocate risk more transparently. Such proactive engagement is especially critical for mega‑projects like the New Hospital Programme and the National Infrastructure and Service Transformation Authority’s £718 bn (≈ $912 bn) pipeline, where even modest price spikes can jeopardize financing and delivery timelines. By embedding risk‑sharing clauses and adopting flexible procurement models, firms can protect margins while maintaining the pace of essential public‑sector investments.

The consensus among industry monitors reinforces the inflation signal: RICS’s Construction Monitor projects a 5.6% rise in tender prices over the next 12 months, Mace’s Q1 view adds a 0.5% bump, and the Building Cost Information Service foresees a 15% cost escalation across five years. Together, these figures suggest that the 5% figure is a floor rather than a ceiling, prompting investors and policymakers to reassess funding allocations and consider strategic interventions such as targeted subsidies for energy‑intensive materials. For contractors, the message is clear—embed robust cost‑contingency buffers now to safeguard profitability in an increasingly uncertain market.