Mace: rising labour costs reflect industry uncertainty 

Construction pay is growing at its second highest rate since the pandemic, according to Mace’s latest industry forecast.

The consultancy’s quarterly Market View report shows that construction pay is now rising faster than all but one other sector, with vacancies also jumping to their highest level in 18 months. 

While pay growth across the whole economy spent most of last year between 5% and 6%, construction pay growth more than doubled from March to the end of 2024.

Construction labour costs rose by 1.6% in the last quarter of 2024, putting them 6.5% higher than at the end of 2023. 

Despite current material prices remaining low, higher energy prices and the rise in National Insurance and National Living Wage may push up costs in the coming months, the report warned. 

As a result, Mace has revised its tender price forecast for the year ahead. Nationally, it has increased from 3.5% to 4% for 2025, while 2026, 2027 and 2028 have been left unchanged.

For London, the forecast is up from 3% to 3.5% in 2025, with 2026, 2027 and 2028 also remaining the same.

Commenting on the report, Oliver North, director of cost and commercial management, Europe, Mace Consult, said a focus on construction productivity, which remains low, will help to address the number of vacancies across the industry.

He added: “The welcome recent government funding announcement, incorporating £600m to train 60,000 more construction workers, will be crucial in addressing shortages and supporting the industry’s growth also.

“However, economic and political uncertainties remain, and whilst the steps being made when it comes to planning, devolution and funding for the Building Safety Regulator will have a long-term impact, processes need to speed up to boost confidence, help secure pipelines and encourage investment.”