New work output is expected to grow by 18% between 2025 and 2030.

Dr David Crosthwaite, chief economist at BCIS, said: “At the mid-point of the year, the construction sector is still stagnating, with output growth subdued. Confidence continues to be weighed down by domestic uncertainty and wider global pressures.

“The 27% quarterly rise in new orders we saw in the first quarter, particularly in infrastructure and industrial sectors, offered a welcome indication that demand could be starting to recover.”

“Despite all the government announcements in the last few weeks, we still haven’t seen the promised updated project pipeline. A greater certainty around funding and delivery timelines remains key to lifting the sector from its current malaise.”

The BCIS All-in Tender Price Index, which measures the trend of contractors’ pricing levels in accepted tenders, i.e. the cost to the client at commitment to build, saw annual growth of 2.3% in 2Q2025, the same as was recorded in the first quarter of the year.

On the input costs side, labour remains the primary driver of project costs, with increases to employers’ National Insurance Contributions and the National Living Wage feeding into an expected 7.1% annual increase in the BCIS Labour Cost Index in 2Q2025. The index is forecast to increase overall by 16% through to 2Q2030.

Materials cost inflation has been moderating since peaking in 2022, and annual growth in the BCIS Materials Cost Index was negative from the third quarter of 2023 to the second quarter of 2024. BCIS expects the index to grow by 13% over the forecast period.

Total new work output fell by 5.1% between 2023 and 2024 and BCIS is predicting subdued growth in new work output throughout 2025. ONS data showed a 0.9% increase in new work output in the first quarter of 2025 compared with 4Q2024, and a quarterly increase of 1.7%.

The greatest annual increases in 1Q2025 were in public non-housing, which includes education, health and justice projects, and in private industrial.