Scottish construction leaders warn delaying projects likely to increase costs as inflation pressures build

Construction industry professionals have cautioned against delaying viable projects in response to market uncertainty, warning that waiting for costs to fall could ultimately expose projects to higher costs and additional delivery risks.

The warning came at a joint meeting of the BCIS Scottish Contractors Panel and BCIS Scottish Tender Price Assessment Panel, where contractors, consultants and cost experts discussed the implications of recent geopolitical instability, rising fuel costs and wider economic pressures on construction projects and supply chains.

Dr David Crosthwaite, chief economist at the Building Cost Information Service (BCIS), said: ‘There can be a temptation during periods of uncertainty to delay decisions and wait for greater clarity. However, construction costs rarely move backwards in any sustained way. While inflation rates may moderate, construction costs tend to stabilise rather than reverse.

‘The greater risk is often that projects lose momentum and incur additional costs through programme slippage, redesign, procurement delays and future inflation while organisations wait for market conditions to improve.’

Survey responses from the panel revealed a notable difference between the cost movements being reported by contractors and the tender price movements currently being observed by consultants.

Contractors participating in the panel reported average cost increases of 4.5% in 2Q2026 and 5% over the past year. Consultants, meanwhile, reported average tender price increases of 1% on the quarter and 3.5% annually.

The gap between reported movement suggests that some inflationary pressures have yet to feed fully into project pricing. This may indicate that contractors are currently absorbing part of the increase through margin pressure, particularly on projects subject to fixed-price arrangements or those procured before the latest period of uncertainty emerged. If cost pressures persist, further movement in tender prices may follow as contractors seek to recover increased costs on future work.

BCIS data already points to significant cost pressure in parts of the construction supply chain, with provisional BCIS data from its Gas Oil (Diesel in Construction) index showing a 38% increase in the year to April 2026.

Gas oil is widely used across construction activities including plant operation, haulage and site logistics, meaning changes in fuel costs can influence not only direct construction activity but also wider transportation, distribution and supply chain costs.

Dr Crosthwaite said: ‘Contractors are seeing cost pressures emerge across a range of areas, while tender price movements remain comparatively subdued. With construction fuel costs increasing significantly in recent months, there are indications that some inflationary pressures may not yet be fully visible in market pricing.

‘Construction projects operate over long timescales, which means there is often a lag between events occurring and their impact becoming visible in published data. As projects move through procurement and existing contracts come up for renewal, it will become clearer how those pressures are feeding through into the wider market.’

Panel members highlighted ongoing uncertainty around fuel costs, steel pricing, impending tariffs and logistics, as well as concerns about labour availability and the resilience of specialist supply chains.

Several participants pointed to the challenges faced by businesses operating under fixed-price contracts, particularly where there is limited ability to recover rapidly increasing input costs. Concerns were also raised that inflation risk is increasingly being pushed further down the supply chain, creating additional pressure on specialist subcontractors and suppliers.

The panel heard examples of clients, consultants and contractors working together to develop practical risk-sharing arrangements that allowed projects to proceed despite heightened uncertainty. Growing interest in fluctuation clauses and inflation-linked procurement mechanisms was also noted, particularly on projects where significant uncertainty remains around future costs.

Dr Crosthwaite added: ‘The focus should be on understanding and managing risk using robust data and realistic assumptions, rather than assuming that delaying a project will necessarily result in a lower outturn cost.

‘Maintaining a financially resilient supply chain will be critical if the industry is to deliver future housing, infrastructure and energy ambitions. The industry’s response to uncertainty should be better risk management and better information, not inactivity.’

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