BCIS reveals updated five-year infrastructure forecast

Civil engineering costs are forecast to rise by 13% over the next five years to 2Q2031, while tender prices for civil engineering work are expected to increase by 16%, according to the latest data from the Building Cost Information Service (BCIS).

Infrastructure new work output is forecast to contract by 1.4% in 2026 before returning to growth of 2.9% in 2027. It is expected to increase by 14.1% between 2026 and 2031.

Dr David Crosthwaite, chief economist at BCIS, said: ‘Infrastructure output has struggled to build momentum. Although activity increased in the second quarter, it remains below last year’s level, while the continued decline in new orders points to a sector still holding back on investment.

‘There are opportunities across water and energy, but the pace at which planned investment translates into work on site remains critical. Ahead of the Autumn Budget, the sector needs greater clarity on the government’s infrastructure investment plans and how projects will move towards delivery.’

The BCIS Civil Engineering Tender Price Index (CETPI), which measures changes in prices agreed between clients and contractors for civil engineering construction work, increased by 0.5% in 2Q2026 compared with the previous quarter, resulting in annual growth of 2.1%.

The BCIS Civil Engineering TPI Panel agreed a further 1.0% quarterly increase for 3Q2026, bringing annual growth to 2.6%. BCIS expects growth to pick up in the second half of 2027.

Dr Crosthwaite said: ‘Our panellists reported cautious optimism, with increased activity in water and energy and pent-up demand in defence. However, cost inflation, project viability constraints and competition for contractor capacity and investment continue to temper the outlook.

‘Clients and contractors are having more conversations about how cost increases are managed and shared, with wider use of fluctuation clauses. Improved planning across supply chains is helping businesses adapt, but uncertainty continues to delay the recovery.’

On input costs, the BCIS General Civil Engineering Cost Index increased by 3.2% in 2Q2026, its largest quarterly rise since 2Q2022, resulting in annual growth of 5.6%. Materials and plant costs were the main drivers.

Elevated oil and gas prices continue to put pressure on fuel, transport and energy-intensive materials. Steel prices are also being affected by increased tariffs and lower import quotas, while non-ferrous metals face supply constraints and strong demand associated with electric vehicles and AI.

Civil engineering costs are forecast to increase by a further 1.8% in 3Q2026, bringing annual growth to 5.5%.

Infrastructure new work output grew by 1.9% in 2Q2026 after three consecutive quarterly declines, but remained 6.8% below the same quarter a year earlier. Electricity, which accounted for 41% of infrastructure output, grew by 5% over the quarter. New infrastructure orders fell by 5.1% compared with 1Q2026 and by 22.5% annually.

Dr Crosthwaite added: ‘The quarterly improvement in output is welcome, but the fall in new orders shows that the recovery has yet to gain a firm footing. A stronger pipeline underpins our forecast for growth from 2027, but funding, approvals and the capacity to deliver will determine how quickly that becomes activity.

‘Elevated input costs remain a risk to project budgets. Even if geopolitical tensions ease, fuel supplies and shipping routes will take time to recover, so clients and contractors need to continue testing their plans against different cost scenarios.’

For more information about BCIS, please visit: www.bcis.co.uk

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Editors notes

The Building Cost Information Service (BCIS) is the leading independent provider of construction data to the built environment and insurance sectors. For some 60 years, BCIS has been collecting, collating, analysing, modelling and interpreting cost information to support built environment professionals, helping them provide cost advice, to have confidence in commercial decision-making and to mitigate risk.