According to the panel, infrastructure demand remained stable during 2Q2026, although activity levels continued to vary across subsectors. Aviation and defence remained among the strongest-performing sectors, but panel members reported capacity constraints in the former and delayed funding allocations within defence.
More broadly, the panel highlighted slow progress in bringing projects to market.
Extended cost planning and value engineering exercises are delaying schemes as clients spend longer exploring opportunities to reduce costs before procurement.
Dr David Crosthwaite, chief economist at BCIS, said, “The key concern raised at the latest Civil Engineering TPI Panel meeting was the length of time it is taking for projects to move forward. Significant effort is reportedly devoted to reducing costs during the early stages of project development, before procurement begins. While that caution is understandable in the current economic climate, panel members noted that prolonged delays are likely to have the opposite effect, with project costs increasing the longer schemes are held back.
“At the same time, the panel highlighted the rising cost of tendering for contractors. As a result, contractors are reportedly becoming more selective about the opportunities they pursue, often favouring routes requiring a lower investment of resources during tendering. This trend has been reinforced by performance bonds becoming both more restrictive and more expensive, further discouraging participation across a range of procurements.”
The panel also identified ongoing skills shortages as a challenge. Capacity pressures were reported among some professional roles, particularly within consultancies, as well as among specialist trades typically required during the final stages of projects. While these constraints are currently less pronounced in a softer market, panel members warned that any increase in activity could quickly expose existing capacity gaps.
Members also discussed potential changes in steel package costs. They noted that isolating a single cost driver is difficult given the range of factors affecting the market, including the ongoing impact of the war in Ukraine, proposed changes to UK tariff policies, the conflict involving Iran and the introduction of Carbon Border Adjustment Mechanisms in both the UK and EU.
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