The rate of inflation in the construction industry

Published: May 1, 2023
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The Rate Of Inflation In The Construction Industry

Inflation rate

A report by the Society of Chartered Surveyors suggests that the rate at which prices increase in the construction sector is starting to slow down. The SCSI Tender Price Index reveals that the inflation rate reduced significantly towards the end of 2022, dropping from a high of 7.5% to 4% (overall).

This might be because fuel and energy prices have decreased, and there are fewer problems with the supply chain.

Cost reductions

Material costs have dropped starting this year. The cost of steel has increased quickly for the past two years but now, the price is starting to come down a lot. Gardiner & Theobald found that the cost of structural steel decreased to about £1,000 per tonne in January (from £1,450).

Rebar has also gotten cheaper: it used to cost £1,170 per tonne at its highest price, but now it is £980.

Predictions for 2023

For the year ahead, it is challenging to make precise forecasts given the ongoing uncertainty and volatility in the market. However, overall material costs will likely remain high. Here are some foreseeable things to take into account this year:

1. Concrete and cement costs are likely to rise further.

Michael Urie has cautioned that clients and contractors should keep an eye on one area of concern in the coming months: the cost of concrete. According to Urie, even though the price of steel has decreased, the cost of concrete and cement has continued to rise. 

This is because the supply chain for these materials is more limited to certain areas, so suppliers have more control over their pricing and don’t feel as much pressure to lower costs when raw materials or energy prices decrease.

2. Price unpredictability continues to be the only certainty.

Market volatility is another major issue — it is no surprise that these fluctuations happen, one major cause being the Russia-Ukraine war.

Moreover, materials still require a lot of energy to produce — think of plasterboard, aggregates, insulation and plastic ducting. These materials are experiencing ongoing price rises, and these increased costs will impact manufacturers this year.

The increased fuel and energy costs will also have an impact this year.

3. Prices will continue to rise because of labour shortages.

Other factors causing prices to go up are a lot of construction activity and not enough workers to do the task. This is especially obvious in 2023.

The construction industry has seen a surge in activity, particularly in the residential sector. This increase in demand has further exacerbated the labour shortage issue, leading to even higher prices.

Construction companies must offer higher wages and better benefits to attract and retain employees. This increased labour cost is then passed on to consumers through higher prices for construction services.

4. Tender price inflation will likely rise at the end of the year.

There will be a lot of competition in the tendering process later in the year. This is because the economy is facing challenges, and there is a lot of uncertainty in the market now, which will significantly impact the prices later on. 

However, investors are still being cautious — for now.


It is essential to note that while some materials costs have stabilised, the overall prices of construction materials remain high, including other critical materials such as cement and insulation. The cost of transportation and labour also continues to impact project prices significantly.

The broader inflationary pressures affecting the economy, such as supply chain bottlenecks and increased demand, have contributed to rising prices. These factors will likely keep prices elevated in the coming months, putting pressure on construction budgets and causing potential delays in project completion.

If you want someone to guide you through today’s market uncertainty, leave your project in our hands and contact us here.