Aecom’s newest London Major Contractor Survey, an annual survey of contractors running within the capital, highlights that regardless of the marketplace turning into extra aggressive, it has now not grow to be any less expensive. Maximum contractors are keeping up margins and passing on labour and subject material worth will increase of their delicate pricing.
Ultimate yr, Tier 1 contractors bid for brand spanking new paintings at charges now not noticed for the reason that pandemic in 2022, as the typical delicate reaction charge rose to 70%. Tier 1 and Tier 2 mixed delicate reaction charge used to be 64% in 2025, an building up on 2024’s 59% determine.
The delicate reaction charge is the ratio of the collection of tenders invited to post, as opposed to the collection of bids in fact submitted. It is thought of as a powerful indicator of the degrees of pageant and paintings to be had available in the market.
The 2026 document, drawn from a survey of contractors with a mixed turnover of £6bn, discovered higher-than-average inflation of three% (when put next with the Treasury’s 2.2% forecast) and lengthening prices for each professional and unskilled labour as key elements riding the dip in self belief.
The analysis additionally discovered that the emerging call for for information centres is straining the already restricted availability of mechanical, electric and public well being (MEP) subcontractors. That is riding up costs and pageant and is main some contractors to expand in-house MEP capability to improve tasks. Some other key development for 2025 used to be the adoption of synthetic intelligence (AI), with contractors reporting larger use of the generation for tendering and estimating.
“Inflation and labour shortages proceed to impede an more and more aggressive London building marketplace,” mentioned Brian Smith, Aecom’s head of value control and industrial. “This yr’s survey presentations contractors are balancing the wish to safe paintings with managing menace publicity. As pageant intensifies, some are ready to tackle better menace, comparable to committing to lengthy programme periods, to win paintings, whilst others are prioritising lower-risk alternatives with relied on companions. The problem for 2026 can be keeping up balance through strengthening the trade’s resilience and labour capability forward of what’s anticipated to be a dynamic 2027.”
Smith persisted: “One rising development we’ve known this yr is the trialling of AI through contractors. If AI turns into extra deeply built-in of their operations, the prospective advantages are more likely to boost up abruptly as contractors search for new tactics to power efficiencies.”
Having a look forward, the survey respondents have a extra assured outlook for the long term. Tier 1 contractors document wholesome order books for 2026, from a mixture of sectors reasonably than a reliance on any unmarried marketplace. Orders in London had been above the long-term common within the ultimate quarter of 2025, with enlargement throughout all sectors offsetting the yr’s total decline in residential process.
Proof issues to the London building marketplace diversifying clear of residential tasks, transferring center of attention to industrial, refurbishment, public sector, lifestyles sciences, and infrastructure tasks as a substitute, Aecom mentioned.
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