Autumn Budget: energy and fuel cost support welcomed amid persistent construction cost pressures

The government’s Autumn Budget measures to ease energy and fuel costs have been welcomed by BCIS amid ongoing construction cost pressures.

Delivering his first Budget as Chancellor on 28 October, John Healey confirmed that the existing 5p per litre fuel duty cut would be extended until July 2027, providing further temporary relief for businesses and motorists. The 3.7p cut on red diesel was also extended by a further six months to 1 July 2027 but will have less impact for construction due to its restricted use in the industry.

Other announcements included the reaffirmed introduction of the British Industrial Competitiveness Scheme (BICS) from April 2027, offering more than 10,000 eligible manufacturers electricity bill reductions of up to 25%. This will include an additional payment in 2027 reflecting support they would have received had the scheme started sooner.

BCIS chief economist Dr David Crosthwaite praised the measures but cautioned that they may have a limited impact on easing wider cost pressures. He said: ‘The confirmed freeze on fuel duty will no doubt be a relief. Conflict-driven inflation has been ramping up for an industry reliant on haulage, plant and on-site working. It’s a good decision from the Treasury that should avoid increasing the burden even if it cannot reduce costs.

‘That said, the relief is temporary, with fuel duty still scheduled to rise from July next year. Given the sustained volatility in global energy markets, it’s difficult to predict what will be shaping fuel prices by then and the further pressures contractors and their supply chains might be facing. The British Industrial Competitiveness Scheme is also a positive measure, particularly for manufacturers facing persistently high electricity costs. But there are questions over how much of the construction supply chain will benefit.

‘Eligibility remains unclear for some key construction materials producers, including clay brick and tile manufacturers, that currently fall outside the scheme. Even where businesses qualify, many energy-intensive production processes rely heavily on gas, meaning reductions in electricity bills will only address part of their overall energy costs.

‘While these measures should offer some support, they are unlikely to significantly reduce the cost pressures already working their way through construction supply chains. For clients and contractors, the challenge is still to manage that uncertainty. Realistic budgeting, early procurement planning and close monitoring of cost movements remain essential to maintaining viability.’

Energy market volatility has intensified since the outbreak of conflict involving the US and Iran in late February 2026, with further escalation across the Middle East contributing to sustained increases in global oil and gas prices.

Brent crude, the global benchmark for oil prices, has remained around or above $100 a barrel since September. As of 2 November, prices remain above that mark at around $108 per barrel⁽¹⁾. The effects are increasingly evident in construction materials prices. The latest construction materials price indices (CMPIs), published by the Department for Business and Trade, show that materials price inflation has accelerated in recent months.

In the year to August 2026, the All Work index rose by 6.4%, the highest annual increase recorded since March 2023. Official data also indicate that materials requiring energy-intensive manufacturing processes, or derived from oil, have been particularly exposed to rising costs. Fabricated structural steel and rigid pipes and fittings are among the products that have experienced higher rates of price inflation, rising by 21.2% and 15.5% respectively in the 12 months to August.

Although extended import tariff suspensions, which trade bodies say include chemicals and plastics, may provide some relief for manufacturers of products such as insulation, pipes, sealants and coatings, the extent to which these offset wider energy-related cost increases remains uncertain. The impact of the conflict on UK diesel prices has also become more pronounced in recent months, with average diesel prices briefly passing £2 per litre for the first time in early October. These increases are being reflected in construction industry costs, with provisional BCIS data indicating a 42.5% annual rise in road diesel (DERV) costs for civil and related specialist engineering works in September 2026.

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^{(1) Trading Economics – Brent Oil – here}