The UK construction sector is entering one of its most challenging cost environments in over a decade. New government steel tariffs, a 60% reduction in import quotas, geopolitical pressures on energy markets and ongoing supply chain instability are pushing material prices sharply upwards. The effects are already visible across live projects, with cost certainty becoming increasingly difficult to secure.

For Local Authorities, Housing Associations and Developers, understanding these pressures, and responding early, is now essential to protecting the viability and deliverability of schemes.

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What is driving the cost increases?

Multiple factors are converging to push construction costs upward:

• Structural steel prices – Prices have risen by up to 30% since early 2026, driven by market uncertainty ahead of the new tariff regime.
• New steel tariffs – From July 2026, government tariffs and a 60% reduction in import quotas take effect, with further price increases expected.
• Energy and fuel instability – Elevated energy costs and geopolitical disruptions continue to affect manufacturing and logistics.
• Supply chain pressures – The Construction Leadership Council reports severe and immediate risks, with some live projects already experiencing cost increases of up to 18%.

These pressures are not isolated. They are feeding into tender prices, supply chain capacity and contractor margins, making cost certainty harder to achieve and scheme appraisal more complex.

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What this means for your project

The risks are real and wide-ranging:

• Pre-tender cost estimates may no longer reflect current market conditions.
• Tendered prices are increasingly subject to material fluctuation clauses.
• Contractor pricing is becoming more cautious, with some firms absorbing risk to secure work, a pattern that has historically contributed to downstream insolvency.
• Programme impacts are emerging, driven by extended material lead time and constrained supply chains.

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What clients should do now

To protect viability in a rising‑cost environment, clients should act early and decisively:

• Reassess pre‑tender estimates within the next 4–6 weeks to ensure alignment with current market conditions.
• Stress‑test procurement routes for exposure to steel‑related volatility.
• Review risk allocation in contracts, particularly around material fluctuations.
• Engage cost consultants earlier than usual, especially for steel‑intensive or energy‑sensitive schemes.

Consider alternative specifications where appropriate to mitigate cost pressure.

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How Potter Raper can help

Our teams are actively monitoring market conditions and supporting clients through this period of volatility. We provide:

• Up-to-date cost advice informed by current market intelligence.
• Early procurement and contractor engagement strategies to reduce exposure.
• Value engineering and alternative specification support where costs are threatening viability.
• Commercial management throughout delivery to protect budget and programme.
• Strategic guidance to help clients make informed decisions in a rapidly changing market.

Clients rely on us for early warnings, market‑tested cost advice and procurement strategies that reduce exposure before it becomes a budget issue.

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Our experience

Oxford Way – Sapphire Independent Housing

When early costs came in over budget, we ran a PCSA process with the design team to rework the scheme until it hit the client’s target cost, before construction began. The infill sites are now on site, an example of early intervention protecting viability without derailing delivery.

Hart Road – Legal & General Affordable Homes

Identified early in pre-contract stages that achieving the client’s Net Zero Carbon ambitions would carry a cost premium over a traditional build. We provided regular market cost updates throughout pre-contract, working closely with the design team and supply chain to identify savings, without compromising quality or the project’s sustainability targets.

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What’s next: market outlook

Over the next 12 months, clients should expect:

• Continued steel price volatility as tariffs bed in.
• Increased contractor caution in pricing and risk allocation.
• Greater interest in alternative materials and hybrid structural solutions.
• Ongoing pressure on energy‑intensive products.
• More selective tendering behaviour from contractors.

Proactive planning will be essential.

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The importance of acting early

In a rising cost environment, the clients who fare best are those who engage professional advisors early, make procurement decisions with full awareness of market conditions, and maintain rigorous cost oversight throughout delivery. Waiting until a budget gap emerges is rarely the right approach.

If you are concerned about how the current market conditions could affect your scheme, we are here to help.

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Speak to our team
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