The cost picture across sectors
UK building costs were 3.8% higher year-on-year as of September 2026, with a 13% cumulative rise projected over five years driven largely by materials. Manufacturers report purchase price inflation easing only slowly, and tariff-driven cost pressure is compounding the picture across multiple sectors at once.
Why fixed-price contracts are under strain
Long-term fixed-price agreements signed before this cost environment took hold are now a source of margin risk for suppliers and a false sense of security for buyers. When a supplier is absorbing losses on a fixed contract, service quality and delivery reliability tend to suffer long before the contract is renegotiated.
A more resilient contract structure
Index-linked pricing mechanisms, tighter change-control clauses and shorter review cycles are replacing rigid multi-year fixed pricing in the contracts performing best right now. Buyers who resist any cost-sharing mechanism at all are increasingly finding suppliers unwilling to bid, or bidding with inflated risk premiums built in.
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