Rising material costs in 2025–26: what the data tells us

Construction cost inflation has moderated from its 2022 peak — but the structural pressures on project budgets haven’t gone away. Here’s what the latest data means for developers planning schemes right now.

There was a time, not long ago, when the question was simply how bad construction cost inflation was going to get. At its peak in mid-2022, the BCIS General Building Cost Index was rising at over 10% year-on-year. That period has passed (thankfully!) but anyone concluding that the cost environment has returned to normal is reading the data too selectively.

Annual inflation in the BCIS General Building Cost Index stood at 4.4% in October 2025 – still running above CPI (3.6% at the same date). For a £10 million scheme, the difference between budgeting to CPI versus a construction-specific index, represents approximately £80,000 in underestimate. That is not a rounding error, that is a chunk of your contingency.

Where costs are still moving

Labour remains the primary driver. The BCIS Labour Cost Index rose 7.1% year-on-year in Q2 2025, and is forecast to increase 15% overall to 2030. The electricians’ Joint Industry Board deal locked in a 5% pay increase in 2025, with further increases of approximately 4–5% per year through to 2028. These are known, contracted increases — not projections.

BCIS construction rates increased 5% on average in Q2 2025 vs the same period in 2024, with demolition and repair trades rising 6.7%

Materials have been more stable, but are not standing still. The BCIS Materials Cost Index is forecast to grow 13% between 2025 and 2030. Within that average, individual trades vary considerably: demolition and repair rates rose 6.7% in Q2 2025 alone, while structural steel fell slightly at -1.3%. Developers and their cost consultants need to look beneath the headline indices.

No one should be planning a construction budget using CPI. Construction inflation is a different number — and it is still running higher.

What this means for project budgets in 2026

For schemes entering the market now, there are three cost pressures worth building into budgets. First, tender price inflation: BCIS forecasts a 15% increase in tender prices between 2025 and 2030; approximately 2.5–3% per year. Second, subcontractor cost pressure: 31% of housebuilders in the BCIS Q4 2025 survey cited subcontractor costs as the main driver of inflation, up from materials a year ago. Third, the compounding effect of programme overrun: every month a project overruns, it is exposed to further cost movement in a market where prices are still trending upward.

The BCIS All-in Tender Price Index rose 2.5% year-on-year in Q3 2025. That is modest by recent standards but it sits on top of a 15% cumulative increase from the 2022 cost base. Clients who benchmarked their scheme in 2022 and have not refreshed their cost plans are likely working from figures that no longer reflect what a contractor will price.

A practical approach to cost certainty

Wakemans’ cost management team provides clients with up-to-date cost benchmarking across all sectors: industrial and logistics, hotels and leisure, residential, and public sector. Our cost plans are built from current market data, not historical benchmarks, and our quantity surveying practice monitors cost movement through the project lifecycle rather than at gateway stages only.

The question for developers right now is not whether costs are rising (they are, by every measure) but whether their cost plans reflect it. Getting an independent review of your current budget before you commit to procurement is one of the most straightforward risk management steps available.

Speak to Wakemans’ cost management team about independent cost benchmarking and review for your scheme at wakemans.com/expertise/cost-management