Construction consultant Turner & Townsend has issued a call for firms to focus on retention and retraining of their workforces in order to keep construction inflation under control.
Turner & Townsend’s Spring 2025 UK Construction Market Intelligence (UKMI) report forecasts that tender price inflation (TPI) in the industry will remain stubbornly high despite construction materials price inflation having eased from the previous record highs.
As the UK government works to boost development across real estate and infrastructure, Turner & Townsend is forecasting that TPI rates over the next three years will remain relatively unchanged. Real estate inflation from 2026 to 2029 is predicted to stay constant at 3.5%, while infrastructure inflation over the period is expected to remain at 5.0%.
At the root of these predictions is rising wage growth caused by competition for scarce labour. Five years on from the pandemic, construction’s share of the UK labour force is currently at a record low, with sector employment down 3.4% year on year. The Construction Industry Training Board (CITB) estimates that the average age of a UK construction worker is now over 50 – suggesting a looming cliff edge of retirement. There are government and industry initiatives designed to address this but it will take several years for it to emerge whether these programmes prove any more successful that the similar programmes that have been tried over the past 20-30 years.
Wage rises are outweighing the otherwise disinflationary factors the construction sector is currently experiencing. New work, an indicator of demand, fell 2.4% on the quarter, according to the Office for National Statistics (ONS) and key material prices are falling, with the Department for Business & Trade reporting a 3.1% quarterly decline for structural steel, and a 2.4% fall for sawn wood. However, new US tariffs on materials like steel may see this trend start to reverse.
Turner & Townsend reckons the best way to manage pay inflation is to improve the lot of construction workers not just with money but with corporate love. “More must also be done to improve retention – recognising career progression, inclusion and psychological safety to ensure talent remains in the construction sector at this crucial moment,” the report says.
Martin Sudweeks, UK managing director of cost management at Turner & Townsend, said: “One only has to look at the slate of current and upcoming announcements to see how central the construction sector is to the UK’s economic and social goals – from the recent Planning & Infrastructure Bill to the hotly anticipated industrial and infrastructure strategies. However, multiple headwinds will challenge our ability to deliver against these ambitions.
“All eyes are set particularly closely on US tariffs. But while there remains significant uncertainty around how these tariffs will evolve and the resulting impacts across the globe, we need to ensure we are not taking our focus off those issues which are within our power to solve – our people problem being one of the most critical.
“Half a decade on from the disruption of the Covid-19 pandemic, year-on-year employment is still shrinking. We need to radically rethink how we attract talent – looking to a wider set of disciplines, backgrounds and skills that will deliver the modern, digitally-enabled, creative construction workforce of the future.”
Got a story? Email news@theconstructionindex.co.uk
