Construction tender prices are set to rise by up to 5.0% this year, threatening costs for key UK programmes and challenging project viability, according to new data from global professional services company Turner & Townsend.

In its Winter 2025 UK Market Intelligence report (UKMI), the business forecasts a rate of tender price inflation (TPI) of 3.5% per year across real estate and 5.0% for infrastructure through 2026 and 2027. While these both represent only a modest 0.5 percentage point lift from the TPI rates experienced last year, sustained cost escalation is putting pressure on the viability of new projects at a time of economic uncertainty.

Construction output remains subdued, at its lowest slump since the financial crisis according to the latest figures from the S&P Global UK Construction Purchasing Managers’ Index. However, the sector is seeing a fresh wave of demand as government plans for growth through the modern industrial strategy spur on renewed confidence in logistics, manufacturing and office development. Orders of new work made to construction firms were up by 29.3% in the year from Q3 2024, the fastest increase since the easing of pandemic lockdowns.

The report points to a risk of the TPI rate accelerating further, as the government’s Planning and Infrastructure Act seeks to speed up project starts, further boosting demand, and as Labour’s missions jostle for resource. Against this backdrop, and with the sector losing workers at an alarming rate – some 50,000 in the past year, according to ONS – Turner & Townsend warns that capacity constraints and continued market uncertainty are threatening delivery.

Stephen Jenkins, Strategic Lead for Yorkshire at Turner & Townsend, said: “Yorkshire is entering a critical period, with strong demand across infrastructure, energy and regeneration set against tightening capacity and rising costs. Our latest UK Market Intelligence underlines the importance of acting early to protect viability as more projects come to market. For clients across the region, closer collaboration with the supply chain, realistic cost planning and confident decision making will be essential to keeping programmes moving and ensuring investment delivers long-term value for communities and businesses across Yorkshire.”