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Tue June 18 2024

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Scotland sees costs rise 4.5%

11 Jun Construction input costs in Scotland have increased by an average of 4.5% over the past year, according to the Building Cost Information Service (BCIS).

BCIS chief data officer Karl Horton
BCIS chief data officer Karl Horton

The BCIS recently set up a Scottish contractors panel to help monitor quarterly movements in costs, including the prices agreed between the main contractor and suppliers and subcontractors at the commit to construct stage.

Comprised of representatives of major contractors in Scotland, it also provides insights on the factors affecting costs on construction projects.

With the help of the panel, BCIS has determined that input costs rose by 4.5% in the year to Q2 2024 for Scottish construction.

Chief data officer Karl Horton said: “While inflationary pressure on materials prices has stabilised, panellists said global issues still present a risk to the supply chain. This is particularly the case with electrical products, which, in contrast with other building materials, are predominantly imported and therefore more susceptible to problems when international supply chains are disrupted.

“Of ongoing concern to panellists is the impact of skills shortages in the industry.

“While some sectors, again, for example, electrical, are still receiving a good volume and quality of apprenticeship applications, they said others, particularly plumbing, heating, aircon and ventilation roles, sometimes require additional advertising to attract candidates.”

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Panellists added that declining population and immigration rates present a further challenge, exacerbated by small and medium-sized businesses closing due to the retirement of the owner.

The recent increase in the national minimum wage affected the rates paid to apprentices, which panellists suggested could prompt further rate increases for trained operatives and there is an expectation that labour rates will increase above inflation in the next couple of years.

Panellists also outlined uncertainty among customers around when or if they will move forward with projects, making it more difficult for contractors to plan.

Part of this uncertainty comes from external factors like changes in government, but affordability remains a fundamental issue with prolonged high interest rates.

While there is consideration and some mitigation of inflation on costs, panellists suggested most subcontract work is tendered on a fixed-price basis, with the exception of some longer-term projects, rather than using mechanisms to share risk.

Panel members included Stuart Parker of Morgan Sindall, Garry Shand of Hutcheon Services, Brian McQuade of Robertson Group, Alan Wilson of trade association Select and Paul Dodd of Scottish Futures Trust.

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