IN Brief:
- Mace has retained its 2026 tender-price forecasts across London, real estate, and infrastructure.
- Structural steel prices have risen while new orders and new-work output have weakened.
- Aggressive tendering may increase commercial and delivery risk as input costs recover.
Mace Consult has retained its tender-price inflation forecasts for 2026 as rising material costs collide with weaker activity and increasingly aggressive competition for work.
The consultant continues to forecast inflation of 3.5% for London, 3.5% for national real estate, and 4.5% for national infrastructure during 2026. Those projections remain unchanged from the previous quarterly assessment, despite further evidence that pressure is returning to several construction inputs.
Fabricated structural steel prices rose by 8.5% over the year, while annual construction-material inflation reached its highest level for three years. Steel has been particularly exposed to geopolitical disruption, energy costs, international trade measures, and changes to the UK’s import tariff and quota arrangements.
Demand indicators have weakened at the same time, with new orders falling by 10.5% during the first quarter of 2026 and all new-work output declining by 1.9%. Repair and maintenance has provided greater support, widening the gap between sectors with established workloads and those still struggling to convert investment or planning decisions into starts.
Where order books are thinner, contractors have a strong incentive to reduce allowances, accept narrower margins, or assume that procurement savings will emerge after award. Such bids can remain deliverable when risks are tightly controlled, but they offer limited protection against design development, programme extension, supply disruption, or further material inflation.
Mace has warned that aggressive pricing can create commercial problems later in the project lifecycle. When the available margin is consumed, pressure can reappear through claims, disputed scope, subcontract renegotiation, reduced management resource, or more restrictive interpretations of contract obligations.
Recent market data has also shown construction starts and main-contract awards weakening through the second quarter, even as detailed planning approvals improved. Projects are progressing through design and consent, but many are taking longer to secure finance, reach procurement, or move into physical construction.
That imbalance encourages strong competition for the schemes that do reach tender, particularly among contractors seeking to protect turnover and retain teams. The resulting prices may appear subdued even while the cost of delivering the work continues to rise.
Steel remains one of the most visible areas of exposure because it affects structural frames, reinforcement, roofing, façades, temporary works, mechanical equipment, and specialist manufactured components. Uncertainty also influences quotation validity, stockholding, lead times, and the willingness of suppliers to fix rates many months before delivery.
Energy-intensive materials face related pressures, with cement, bricks, glass, insulation, aluminium products, and some plastics exposed to energy, fuel, transport, and raw-material costs. Shipping disruption can affect imported equipment and components, leaving projects with long pre-construction periods vulnerable to procurement conditions that differ markedly from their original cost plans.
Infrastructure remains the strongest of Mace’s forecast sectors, supported by regulated and public investment programmes. Its higher tender-price projection reflects the scale of planned work and the limited number of companies able to deliver the largest or most technically demanding packages.
Many of those programmes compete for the same civil engineers, commercial managers, planners, building-services specialists, and subcontractors. A strong national pipeline can therefore create local shortages and package-specific inflation even when general construction output is subdued.
Real estate is subject to a different balance, with commercial and residential schemes remaining sensitive to interest rates, rents, sales values, regulatory approvals, and development finance. Higher build costs can delay marginal projects, while a shortage of starts can encourage contractors to accept pricing positions that provide little room for later movement.
Procurement strategy will consequently carry as much weight as the headline inflation percentage applied to a cost plan. Early orders, indexed pricing, fluctuation provisions, supplier engagement, and transparent risk allowances can reduce uncertainty, although each mechanism changes where the financial exposure ultimately sits.
Passing all inflation risk to a main contractor does not remove that risk when the accepted bid lacks the margin or supply-chain commitments needed to absorb it. A nominally fixed price can become unstable through claims, insolvency, delayed procurement, or declining performance.
Mace’s unchanged forecasts suggest that upward material pressure and downward competitive pressure remain broadly balanced within its central scenario. Tender returns during the second half of 2026 will show whether that balance can be maintained as current cost increases work through supplier quotations.
