TPI Survey Feedback

WORKLOAD

Construction workloads remain broadly stable, supported by previously secured projects and ongoing delivery rather than a strong inflow of new work. Forward-looking indicators continue to signal contraction, but there are early signs that conditions are beginning to stabilise. The January UK Construction PMI rose sharply to 46.4, marking the slowest reduction in activity for seven months and the strongest reading since mid-2025. While new orders remained in decline, the pace of contraction eased, particularly in commercial work, where post-Budget clarity and improving investment sentiment helped to steady demand. This points to a market that remains cautious, but one where the depth of the downturn is moderating — with improving sentiment and enquiry levels yet to translate into site starts.

There are emerging signs of pent-up demand. Multiple survey respondents note that schemes held back towards the end of last year are beginning to re-emerge, particularly as Building Safety Act Gateway processes ease and approval durations shorten. This is most evident in residential and mixed-use projects, where Gateway 2 timelines have been a key constraint. New enquiries are expected to pick up in Q3–Q4, with contract awards and commencements increasingly deferred into later 2026 rather than cancelled outright. This “slow now, later lift” profile is consistent with wider market evidence pointing to resilient underlying pipelines but slower conversion into site starts.

Sector dynamics remain highly uneven. Infrastructure-related workloads are comparatively resilient, particularly in water, energy and regulated utilities, where many clients are midway through five-year funding cycles. This is resulting in cautious activity levels ahead of the financial year-end, followed by an expected acceleration as budgets reset. Investment in water and renewable energy — including niche areas such as long-duration energy storage — is increasing, although many schemes remain in early development and require support to progress into contract.

In contrast, new-build commercial office activity remains muted, with very few speculative starts coming through, although tenant demand for pre-lets in prime locations remains strong. Refurbishment, retrofit and fit-out work has remained comparatively resilient, underpinned by flight-to-quality dynamics, ESG-driven asset repositioning and occupiers adapting existing space rather than committing to new-build development. Elsewhere, data centres, airports and selected logistics and life sciences projects continue to generate steady workloads, with larger schemes entering PQQ or procurement stages over the next 12 months.

Looking ahead, the prevailing expectation is for a muted start to 2026, followed by improving workloads later in the year. The first half of 2026 is therefore expected to be characterised by pre-contract activity, bid progression and preparatory work, positioning the market for stronger delivery conditions later in the year and into 2027.

MARKET CONDITIONS

Survey responses consistently point to a market that is functioning, but with heightened caution around risk, funding certainty and scheme viability. Activity levels are being shaped less by a lack of underlying demand and more by elongated decision-making, appraisal challenges and risk transfer dynamics, which continue to slow the pace at which schemes move from feasibility into delivery.

This interpretation is consistent with recent PMI evidence, which continues to signal contraction in activity at the margin. However, survey feedback suggests that this reflects deferral and phasing rather than widespread cancellation, with pre-contract activity, bid progression and feasibility work forming a greater share of near-term engagement than firm site starts.

A recurring theme across the survey is that contractor risk appetite remains constrained. Bidding behaviour is selective, with heightened caution around fixed-price exposure, design immaturity and client-led risk transfer. Procurement route, programme certainty and funding credibility are now as influential as headline workload levels in shaping bid decisions.

These dynamics are reinforcing a two-speed pricing environment. Tier 1 contractors generally remain at higher utilisation levels — supporting firmer pricing discipline — while some Tier 2 contractors face greater pressure to price competitively in order to secure workload continuity, particularly in private building sectors. Importantly, despite softer demand in parts of the market, respondents report no material increase in competitive intensity overall, as margin protection and risk discipline continue to take precedence over volume-led bidding.

Survey feedback indicates that viability, rather than capacity, is the key near-term constraint. While there is no widespread shortage of main contractors, many schemes — particularly in private commercial and residential markets — are struggling to clear funding and appraisal hurdles. As a result, some contractors are prepared to price competitively on selective, must-win opportunities, which can compress margins in certain sectors and temporarily limit pricing pressure, even as labour and specialist trade constraints persist.

Looking ahead, respondents broadly expect market conditions to remain stable over the next six months, with a gradual improvement later in 2026 as funding conditions ease, Gateway processes continue to improve and previously stalled schemes begin to unlock. Survey sentiment supports this view, showing respondents clustering around moderate activity and balanced competition, with fewer anticipating either a sharp deterioration or a rapid upswing. Overall, the market appears to be transitioning from a period of weak demand and cautious decision-making towards a measured, uneven recovery, with momentum building selectively and gradually.