SUBDUED construction output is ‘masking’ the growing cost pressures facing individual projects, according to new analysis from Turner & Townsend.
Despite ‘softer’ market activity, the business has raised its tender price inflation (TPI) forecast for the first time in two years, with its Q4 2026 UK Market Insight (UKMI) report.
Real estate forecasts in the UKMI have risen from 3.5 to 3.75% through both 2026 and 2027. Infrastructure tender pricing is expected to rise from 5 to 5.25% through 2026 and 2027.
Turner & Townsend said total new work output recorded in Q2 2026 was 6.1% lower than the same period last year, with new orders down 18.1% over the past year. However, softening activity in commercial and residential is being countered by ‘buoyant’ investment in sectors such as major infrastructure and energy programmes and data centres.
Pressures are also being compounded by escalating material and commodity costs as a result of tariffs and geopolitical disruption, as well as stricter building regulations and more complex specifications.
Turner & Townsend is urging clients to more closely assess contractor capacity and appetite in the regions and sectors where they plan to build, and engage early. The firm added that well-developed designs, clear scopes and carefully balanced contractual arrangements will help make projects more attractive and secure the supply chain needed to move forward.
James Darrie, strategic lead for Scotland at Turner & Townsend, said, “Scotland’s construction market reflects many of the trends we’re seeing across the UK. While overall activity levels remain mixed, demand associated with infrastructure investment, the energy transition and other major programmes continues to compete for labour, specialist skills and key materials. As a result, project teams need to look beyond national output figures and understand the realities of their local market. Headline data can mask very different conditions on the ground, with contractors and specialist suppliers becoming increasingly selective about the opportunities they pursue.
“For organisations planning investment in Scotland, early engagement with the market is more important than ever. Projects that are well-defined, backed by realistic delivery programmes and supported by balanced commercial arrangements will be better placed to secure the skills and capacity they need.”
