The 0.7% quarterly increase resulted in 2.5% annual growth in the BCIS All-in Tender Price Index (TPI).
BCIS chief economist David Crosthwaite said: “The overall sentiment of the panel was slightly more positive in comparison with the previous quarter, with more optimism reflected in an increased pipeline for the next 12 months.”
With a more positive outlook than in the previous quarter, 54% of panellists said that their pipeline of projects going to tender over the next year had increased slightly in the third quarter, with a further 8% reporting a significant increase. Only 23% said that their pipeline was unchanged, while 15% reported a slight reduction.
Contractor appetite to tender has eased slightly, with 54% of panellists reporting that contractors were ‘quite eager’ to tender, down from 64% three months ago.
Almost a third (31%) said contractors were less eager, while 15% found their required number of tenderers after searching. No one reported contractors as either unwilling to tender or very eager.
Dr Crosthwaite added: “Our panellists highlighted rising staff costs and shortages of appropriately skilled workers. Client caution remains evident in the large commercial sector, where funding is often committed stage by stage, creating uncertainty. The Building Safety Act has shifted risk milestones to Gateway 2, increasing ‘at risk’ funding.”
Challenges cited by panellists include elevated construction costs, regulation and planning processes, grid connection and compliance with new requirements such as biodiversity net gain and net zero standards.
Dr Crosthwaite said: “While challenges remain, the panel’s responses this quarter suggest the market is beginning to stabilise. With a modest rise in tender prices and a stronger pipeline of projects, there are signs of cautious optimism, but delivery will depend on how the sector manages cost pressures, regulation and skills over the coming months.”
The BCIS Civil Engineering TPI panel has also met recently and together estimated that engineering tender prices rose by 1% between the second and third quarters.
Aviation was described as the fastest-moving market, while investment is also picking up in ports and harbours, with private capital, including Middle Eastern investment in energy and vehicle logistics, driving activity.
Rail is also sustaining work through programmes such as East West Rail and Northern Powerhouse Rail, alongside continued HS2 delivery. Activity in the Republic of Ireland was also highlighted, with UK firms engaged as capacity partners on major programmes.
Water sector investment under AMP8 is starting to generate demand, particularly around underground piping works, while the recent defence spending review could stimulate work across roads, aviation and other civils sub-sectors.
Labour availability and wage pressures were described as the predominant drivers of cost inflation in the civil engineering sector.
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