Geopolitical risks have become the main driver of costs for the construction industry this year, according to the global consultancy firm, Rider Levett Bucknall (RLB)
These risks now weigh more heavily than input costs, which are having a lesser impact than they did in 2024, according to the construction and property management consultancy’s latest global data.
Findings published in its Global Annual Report 2025 reveal a swing of 2.3% to geopolitical factors impacting construction costs, including supply chain disruptions, political instability and shifting government policies.
This trend is unsurprising, the firm says, given the significant number of elections worldwide in 2024, many of which resulted in changes of governments.
Paul Beeston, RLB’s head of industry and service insight, said: “Although regions around the world are advancing at different paces, many are grappling with similar geopolitical pressures – trade tariffs, conflicts and shifting policies impacting both energy and skilled labour costs – all converging to create supply side pains at the same time as demand in many regions is beginning to ease.”
Other key findings in the report include:
- 3.4% change in the influence of input costs on construction
After a prolonged period of construction costs tracking above general inflation, the impact of input costs has eased, the report says. Cost of materials, labour and plant and fuel have all moderated, leading to a 3.4% decline in their influence on overall construction escalation.
- 1.6% increase in the impact of commercial risk on construction
Geopolitical risks have not only affected input costs but also shaped the ‘sentiment’ elements of pricing. Estimators often factor these risks into discretionary pricing, reflecting contractors’ reading of the market, order book replenishment, and sustaining business margin.
Furthermore, RLB’s global data indicates that tender prices worldwide are generally more muted than 12 months ago, with an average downward revision of around 0.8%, and in some regions, showing deflation.
Over the past year, more sectors have moved into a trough period (experiencing reduced output and pipeline), with a 6% shift of sectors into the trough of the cycle.
Whilst the tender price forecasts for 2025 and beyond currently show little change from previous predictions, the shift in drivers of the escalation are likely to result in increased volatility, increased spreads of tender returns and more frequent revisions to forecasts.
Global sector shifts
Infrastructure and healthcare are the stand-out sectors with prolonged stability at the top of the cycle, says RLB. This is largely driven by new governments eager to demonstrate tangible benefits to their electorates following recent elections.
Retail and offices have shown some signs of recovery over the last 12 months, moving from trough decline to trough growth.
Data centres and health are reporting strong growth in many regions; most of this growth is currently in the mid-zone. Given their drivers, both are expected to move closer to the peak zone in the coming 12 months.
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