The BCIS Scottish Contractors Panel was formed to help monitor quarterly movement in costs, including the prices agreed between the main contractor and suppliers and subcontractors at the commit to construction stage.

Comprised of representatives of major contractors in Scotland, it also provides insights into the factors affecting costs on construction projects.

Karl Horton, chief data officer, BCIS said: “While inflationary pressure on materials prices has stabilised, panellists said global issues still present a risk to the supply chain.

“This is particularly the case with electrical products, which, in contrast with other building materials, are predominantly imported and therefore more susceptible to problems when international supply chains are disrupted. Of ongoing concern to panellists is the impact of skills shortages in the industry.

“While some sectors, again, for example, electrical, are still receiving a good volume and quality of apprenticeship applications, they said others, particularly plumbing, heating, aircon and ventilation roles, sometimes require additional advertising to attract candidates.”

Panellists added that declining population and immigration rates present a further challenge, exacerbated by small and medium-sized businesses leaving the supply chain due to retirement of the owner.

The recent increase in the national minimum wage affected the rates paid to apprentices, which panellists suggested could prompt further rate increases for trained operatives and there is an expectation that labour rates will increase above inflation in the next couple of years.

Panellists also outlined uncertainty among customers around when or if they will move forward with projects, making it more difficult for contractors to forward plan.

Part of this uncertainty comes from external factors like changes in government, but affordability remains a fundamental issue with prolonged high interest rates.

While there is consideration and some mitigation of inflation on costs, panellists suggested most subcontract work is tendered on a fixed-price basis, with the exception of some longer-term projects, rather than using mechanisms to share risk.

The panel members included Stuart Parker of Morgan Sindall, Garry Shand of Hutcheon Services, Brian McQuade of Robertson Group, Alan Wilson of SELECT and Paul Dodd of Scottish Futures Trust