TPI Survey Feedback

WORKLOAD

Construction workloads remain uneven and increasingly characterised by delayed conversion rather than a complete absence of opportunity. While some firms continue to report stable activity supported by previously secured schemes and long-duration projects, the replenishment cycle for new work remains weak and confidence fragile. Several survey respondents noted that projects reaching second-stage procurement or even contract execution are frequently failing to progress into delivery, often due to viability constraints, funding approvals, affordability pressures and weak investor sentiment. This is contributing to a growing disconnect between visible pipeline activity and actual site starts, with enquiries, bids and speculative input requests remaining active but conversion rates slowing materially. At the same time, some contractors are increasingly looking to secure future workloads amidst softer pipelines, with several respondents reporting teams beginning to come free and supply chains becoming more commercially competitive.

This softer sentiment is increasingly reflected in wider market indicators. The latest S&P Global UK Construction PMI fell sharply to 39.7 in April 2026, signalling the steepest decline in activity since late 2025, with respondents citing subdued demand, fewer tender opportunities and longer sales conversion periods linked to economic uncertainty and the Middle East conflict. However, broader pipeline indicators remain more resilient than current activity levels suggest, reinforcing the view that the market is experiencing a prolonged lag between planning, procurement and mobilisation rather than a collapse in underlying opportunity.

Sector conditions remain highly fragmented. Infrastructure-related activity continues to provide relative resilience, particularly across energy, utilities, aviation, defence and regulated investment programmes, where long-term funding cycles continue to underpin workloads. Survey respondents also reported stable pipelines within higher education, PBSA and selected major programmes.

Commercial markets are showing tentative signs of improvement, particularly in prime London offices and selected regional city centres, where rising rents, low vacancy rates and improving investment activity are beginning to support confidence. However, this recovery remains narrow and concentrated in prime assets and top-tier locations, with affordability levels very challenging without secured pre-lets. Developers continue to prioritise refurbishment, retrofit and fit-out activity over major new-build commitments, with fit-out workloads remaining comparatively buoyant. Residential activity meanwhile remains the weakest-performing segment of the market, with viability pressures, delayed Gateway approvals and funding constraints continuing to suppress project progression.

Overall, the market appears to be in a transitional phase - workloads remain supported by historic pipelines and long-duration schemes, but the replenishment cycle for new work remains weak and highly selective. Although geopolitical tensions and energy markets are creating renewed input cost pressures in certain areas, softer demand conditions and increasing competition for workload are continuing to moderate pricing pressure across much of the market. Several respondents also noted that tier two contractors and below remain willing to fix pricing and absorb short-term volatility in order to secure future workloads.

MARKET CONDITIONS

Our survey responses point to a market operating at moderate activity levels, but with sentiment softening compared with Q1 2026. Conditions are not distressed across the board, but decision-making has become more cautious as clients and contractors reassess risk, funding certainty and price exposure. The survey distribution supports this, with responses remaining clustered around balanced competition, but showing a modest drift towards softer, more competitive conditions.

The Middle East conflict has introduced renewed uncertainty around fuel, energy, shipping and energy-intensive materials. Recent PMI data shows UK construction input cost inflation accelerating to its highest level since June 2022, while supplier lead times lengthened at the fastest pace since December 2022. Several survey respondents also noted early supplier price increase notifications, shorter price validity periods and contractor risk allowances linked to future uncertainty.

The impact, however, is not a simple repeat of the Russia–Ukraine shock. G&T’s analysis frames the current episode primarily as an energy- and volatility-led risk event, rather than a broad structural inflation shock. Oil and gas prices have reacted sharply to developments in the Middle East, but the scale and persistence of the energy shock has, so far, remained more contained than the extreme dislocation experienced following Russia’s invasion of Ukraine in 2022. The current conflict is also likely to have a less direct impact on construction material availability, with the main transmission routes instead running through energy prices, shipping costs, logistics disruption and wider market sentiment.

Combined with softer demand conditions, generally better material availability and greater competition for workload, this is limiting the immediate pass-through of cost pressure. In effect, the market is facing a volatility shock, but one landing in a more price-sensitive and demand-constrained environment.

G&T has modelled three indicative Middle East conflict scenarios against the latest 2026 UK TPI baseline: stabilisation (a fragile ceasefire or gradual de-escalation, with short-term volatility followed by gradual normalisation), prolonged volatility (a breakdown in the ceasefire or continued disruption, resulting in multi-month volatility), and escalation/macroeconomic shock (a wider Middle East conflict, prolonged disruption and broader macroeconomic shock). These are not forecasts, but illustrative upside-risk pathways showing how tender prices could respond if energy, shipping and sentiment effects persist or intensify. The model has been rebased to reflect the latest G&T forecast, so the scenario uplifts shown below represent residual upside above the revised baseline, rather than the full theoretical impact from a pre-conflict position.

The results suggest that, at the upper end of each scenario range, the residual impact could be limited to around 1.0% above baseline by year-end under a stabilisation scenario. A more prolonged period of volatility could add around 2.4%, while an escalation/macroeconomic shock scenario could add around 3.9%. This supports the view that the current episode is best understood, at this stage, as a volatility-led upside risk rather than a broad-based inflation shock, although it has widened the range of plausible 2026 tender price outcomes.

The more important second-order effect may be on confidence and viability. Prior to the escalation, market sentiment had been gradually improving, supported by expectations that lower interest rates would ease financing pressures and support development appraisals, investment decisions and project progression. Higher energy prices and renewed inflation risk have complicated that path. Although interest rates are still expected to trend lower over the medium term, financial markets no longer view the rate-cut cycle as straightforward or guaranteed, particularly if energy-related inflation pressures persist. Higher-for-longer financing costs would weigh most heavily on private housing, commercial development and other debt-sensitive sectors.

Contractor bidding behaviour remains highly selective. Procurement route, design maturity, programme certainty and client credibility are increasingly important in determining appetite. Some Tier 1 contractors and specialist MEP providers remain relatively well utilised, but parts of the Tier 2 market are becoming more competitive as firms look to secure forward workload. The result is a tactical tendering environment - contractors may price keenly where projects are credible and risk is controlled, but remain cautious where inflation exposure, funding uncertainty or procurement quality are unclear.

Overall, market conditions are better described as risk-sensitive than simply weak. Competitive pressure is present across much of the market, but geopolitical volatility is reintroducing uncertainty into pricing, procurement and investment decisions. For tender prices, this creates a finely balanced environment - softer demand is restraining pricing power, while energy-related cost risk, interest-rate uncertainty and selective supply-chain constraints continue to prevent a more decisive easing in market conditions.