Spring 2026 Frankham Market Update

7 Min Read

What A Diff’rence a Day Made… Our Winter Market Bulletin was published as tensions in the Middle East were reigniting, but prior to the escalation into full-scale conflict just days later. Once again, a critical maritime route, this time the Strait of Hormuz, has emerged as a focal point of risk, influencing construction costs through volatility in energy prices and material supply chains. These issues have rapidly returned to the forefront of industry concern.

Market Conditions

While the latest fiscal data has yet to fully reflect these emerging challenges and construction output did increase by 0.4% in the first quarter of 2026, geopolitical uncertainty is driving caution across the sector. Coupled with the continued elevated cost of financing, and continued labour cost and availability issues, the heightened perceived risk due to the geopolitical uncertainty is contributing to delays in project approvals and the progression of works.

The BCIS Tender Price Index, last reported at the end of March, maintained an inflation forecast of 3.2% by year-end. However, it is likely that the June update will reflect a higher outturn. Other industry benchmarks, including a recent report by Turner & Townsend, forecast infrastructure inflation reaching 5% in 2026 and an upturn towards this figure seems a reasonable estimate across the built environment.

Legislative Updates

These inflationary pressures are once again drawing attention to the viability of fixed-price contracts. Concurrently, the Commercial Payments Bill, first announced in March of this year, seeks to address persistent issues around payment practices and high insolvency rates within the sector.

The introduction of a statutory 60-day cap on payment terms (reduced to 30 days for public authorities) will be widely welcomed, though it may not go far enough in practice. Whilst taking this step, why not legislate for a 30-day cap across the board? In addition to this, a mandatory right to statutory interest at 8% above the Bank of England base rate is being proposed to encourage clients to meet these payment terms. Where contract terms vary or exclude a variation to this, the terms will be null and void under the legislation.

A more transformative proposal is the planned abolition of retentions. The Bill outlines a two-year transition period following enactment, with a further one-year run-off. After this period, all contractual retention provisions will become void. While the removal of retentions addresses long-standing concerns, it is likely to give rise to alternative risk mitigation mechanisms. The increased use of performance bonds is anticipated; however, the bond market remains constrained, and associated costs will inevitably be passed on to employers.

Retentions have historically been used as a safeguard against “loose” interim valuations. Their removal raises an important question: will employers instead seek to withhold value through tighter valuation practices to achieve the same level of protection?

Further legislative measures were outlined in the recent King’s Speech to accelerate the remediation of unsafe buildings. The proposed Remediation Bill will provide statutory backing to the 2025 Remediation Acceleration Plan. Key provisions include:

Requiring construction product manufacturers to contribute to rectifying defects, closing longstanding regulatory gaps.
Introducing a legal duty to remediate, compelling accountable parties—such as freeholders—to identify, assess and rectify safety issues without delay.
Standardising external wall assessment processes to ensure a consistent national approach, alongside the creation of a register for buildings between 11–18 metres requiring remediation.
Establishing a remediation backstop, enabling third parties (e.g. Homes England) to intervene where responsible parties fail to act, ensuring residents are not left without recourse.

Data published at the end of April indicates that 4,322 residential buildings over 11 metres in height have been identified with unsafe cladding. Of these, 2,399 (56%) have either begun or completed remediation works, while 1,531 (35%) have reached completion. Although progress is evident, the pace remains insufficient, and the Remediation Bill is expected to play a crucial role in accelerating delivery.

A Landmark Legal Ruling

May 2026 also saw a landmark High Court ruling in the case of Crest Nicholson v Ardmore. The judgment confirmed that corporate restructuring and insolvency cannot necessarily be relied upon to avoid liability for fire safety defects. The Court found that building owners may pursue associated companies within a wider corporate group where the original contractor is insolvent, with liability capable of being extended where it is considered “just and equitable” to do so.

Importantly, it also confirmed that a Building Liability Order under the Building Safety Act 2022 can be granted before underlying liability is established at trial, often referred to as an “anticipatory” order. This enables the Court to extend liability at an earlier stage in proceedings, reducing the risk of companies avoiding their financial obligations through corporate structuring. The ruling reinforces the intent of the Building Safety Act to ensure that responsibility for building safety defects cannot be confined to asset‑limited entities, strengthening routes to recovery for remediation works.

HS2 Cost Escalation: Lessons in Delivery

The cost of High Speed 2 (HS2) once again dominated headlines in May, with revised estimates now ranging between £87.7 billion and £102.7 billion—substantially higher than the original £32–£37.5 billion forecast in 2012. While the magnitude of the increase is stark, the underlying causes are familiar. Approximately two-thirds of the cost uplift is attributed to scope omissions, underestimation, and inefficiencies in delivery. The remaining third is driven by abnormal inflationary pressures. These factors reinforce lessons for the industry: the critical importance of robust project briefing, comprehensive cost planning, accurate estimating, continuous cost monitoring, and resilient risk management. The HS2 programme serves as a powerful reminder that even the most high-profile projects remain vulnerable to foundational shortcomings in planning and execution.

Outlook for 2026

Looking ahead to the remainder of 2026, we will continue to operate in a heightened environment of uncertainty. Geopolitical instability, particularly in energy-sensitive regions, will continue to provide pressure on material and logistics costs, with inflation likely to exceed earlier forecasts in the short term. How the next steps in the Middle East unfold will undoubtedly heavily influence the coming year.

Tender price inflation is therefore anticipated to track above the previously expected 3–3.5% range, potentially aligning more closely with infrastructure-led forecasts of circa 5%. This will place renewed strain on fixed-price contracting and reinforce the need for more flexible procurement strategies, with thought given to use of target cost and collaborative contracting approaches.

Overall, the outlook for the sector is one of cautious progression. While output is expected to remain stable, growth will likely be modest and uneven across sub-sectors. Success in planning and delivery will depend on disciplined cost planning, proactive risk management, and adaptive commercial strategies capable of responding to a rapidly changing external landscape.

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