Experts at Arcadis have highlighted a very confused market in their latest analysis.

The consultants are forecasting higher levels of construction inflation from 2026 onwards even as the industry’s recovery struggles to take-off in 2024 and 2025.

This will be due to resource constraints and the impact of delayed procurements on the future shape of the supply chain.

Contractors are looking forward to more work in the pipeline but “significant headwinds” include delays to new residential products caused by the Building Safety Act which came into force late last year.

One contractor said: “A lot of people are only just waking up to the impact of the act and it’s dawning on them now just how many projects could be hit by delays.”

Arcadis said that even though workload continues to shrink, clients are facing capacity constraints.

It said: “Many contractors have teams committed to stalled 2-stage procurements, reducing market competitiveness.”

Ian Goodridge, Market Intelligence Lead at Arcadis, added: “Capacity issues caused by projects let on a two-stage basis create a ‘holding pattern’ where contractors are committed to resourcing uncertain projects.

“This situation leads to a paradox of falling workload and contractors claiming they are too busy, as the new work pipeline remains empty.  Clients need to engage with potential bidders at an early project stage to avoid the risk of a short bid list.”

Inflation forecasts from Arcadis