Karl Horton

Members of the BCIS Scottish Tender Price Assessment Panel, which helps measure the trend of contractors’ pricing levels in accepted tenders in Scotland, reported a 0.65% increase in 3Q 2024 compared with 2Q 2024, as well as a rise of 3.4% on an annual basis.

The BCIS Scottish Contractors Panel, which was formed to monitor movement in agreed pricing between the main contractor, suppliers and subcontractors, found input costs in Scotland increased by an average of 1.75% on a quarterly basis, and by 5% in the year to 3Q 2024.

BCIS’ chief data officer, Karl Horton, said: “Both panels reported a sufficient appetite to tender – either from contractors or from subcontractors – though they said this can be dependent on the procurement route.

“Both panels are also eagerly awaiting the outcome of the Autumn Budget, as of course many in the industry are, to see what impact this has on construction in Scotland.”

The contractors panel outlined ways in which changes in government policy, particularly around net zero targets, have led to a change in attitudes.

With funding for grants withdrawn or pushed back, businesses which would have been committed to training in new technologies and preparing themselves for installations, are now reluctant to train operatives, for example in solar PV, battery storage, or electric vehicle charge point installation.

Panellists said uncertainty on rent caps is also proving to be an issue for investors and funders in the residential sector, which has seen numerous projects delayed.

Since investors can’t identify what rent increases are going to be permitted, many have questioned whether they want to invest in this market until they know what’s going on.

As such, some residential projects have stalled and many build to rent schemes over the last year or two have been pulled. 

Similarly, the Tender Price Assessment Panel said much depends on what is in the government’s plans, particularly around public sector spending and, for example, the ongoing moratorium on health projects.

Karl Horton added: “The Construction Pipeline Forecast Tool was updated in July but, as members of the two panels reflected, projects can only be added to the best knowledge of the authorities. Some projects which had been classified as firm, have been reclassified as speculative, and uncertainty over budgets remains a significant factor in projects being delayed or withdrawn.

“Members of the contractors panel said they are confident the work is there, but visibility of what’s coming through the pipeline is currently limited to the next few months.”

Both panels reported differential price movement between building work and mechanical and electrical (M&E) work. The contractors panel cited the limited availability of sprinkler specialists as well as increased design costs as being particularly problematic.

The reliance of the electrical sector on imported materials, with around 90% of products coming from Europe and further afield, was also highlighted as a potential challenge due to the ongoing risk of disruptions to deliveries due to geopolitical events.

The tender price panel said reasons for differential movement include a lack of specialist contractors, and it was unlikely that the price of M&E work is going to come down.

Karl Horton added: “It’s interesting to see a softening in the Scottish market, as described by the tender price panel, with contractors seemingly more comfortable taking on risk, though fixed price agreements come with a cost.

“The contractors panel described a growing tendency for design elements to be pushed their way, the cost of which sometimes has to be absorbed by themselves and the supply chain.

“There’s also an apparent shift in working practices since the pandemic, which is impacting on delivery times. The contractors panel described both pre-construction and build phases taking longer, with already limited hours on site often exacerbated by the logistics of transporting workers to more remote areas.”