Dr David Crosthwaite

That is the warning from the Building Cost Information Service (BCIS) Scottish Contractors Panel, which tracks movement in tender pricing levels in the country.

The panel which is comprised of representatives of major contractors, laid out their concerns around the government’s white paper on lowering immigration as they reported construction costs increased by an average of 4.65% in the year to 2Q2025.

The increased costs include the absorption of recent rises to employers’ National Insurance Contributions and the impact of constrained capacity in the supply chain, with panellists reporting it has become increasingly difficult to recruit workers with the right skillset.

BCIS chief economist Dr David Crosthwaite, said: “There has been a decrease in migrant labour in Scotland since Brexit, which the contractors said has particularly affected availability in Aberdeen. They’ve also seen an increasing trend of workers moving abroad for work, to places where there is the incentive of tax-free employment.

“This is in tandem with the already known problem of the workforce being dominated by the older age group, so there is natural attrition through retirement. On top of that, the panel are reporting many older workers - who are highly experienced and have been on site for decades - are choosing to leave the sector rather than go through the process of gaining qualifications to get a CSCS card.”

Among the government’s proposals is the raising of the skilled worker visa threshold to RQF 6, the equivalent of graduate level.

Figures in the immigration white paper show that the majority of skilled worker visas granted in construction since spring 2024 have been for applicants below RQF 6, with the proposed changes therefore set to have a significant impact on the sector.

Dr Crosthwaite added: “This proposal would no doubt exclude many of the construction workers that are needed. Much of the recent debate over visa reforms has centred on care workers, but there are clear parallels within the construction industry. Both sectors have historically relied on migrant labour when domestic supply has fallen short – and both sectors currently face persistent challenges in attracting UK workers; challenges that appear to run deeper than pay and conditions alone.

“Perceptions of job status, long-term security and career progression all seem to play a role in deterring domestic interest in these vital roles.”

Alan Wilson, a panel member and managing director of electrical contracting trade association SELECT, said the changes could disproportionately affect Scottish construction. He commented: “A projected rise in work demand in England in 2026, in housebuilding especially, is likely to lead to Scottish workers migrating south, with no opportunity to top up here with workers from abroad.”

Wilson is calling on the First Minister to lobby the UK government over its immigration policy, to maintain the current RFQ 3 position on immigrant workers, to highlight the potential skills drain if Scottish workers move south to plug gaps, and to engage with construction professions on how they can best support firms to recruit more young people.

He said: “The construction sector is a vital pillar of the Scottish economy, supporting infrastructure development, housing delivery and the green transition. However, the industry is experiencing a persistent and growing skills shortage.

“The Construction Industry Training Board has said that an additional 26,100 workers will be needed to meet demand in Scotland by 2028, yet apprenticeship starts have remained flat, a level that is insufficient to address the expected workforce gaps.”

The UK government has also proposed allowing only a narrow list of critical shortage occupations onto the Temporary Shortage List, preferring to increase training and participation rates among UK-born residents.

Dr Crosthwaite added: “While its ambition to grow the domestic workforce is welcome, the government is at real risk of creating an unbridgeable gap between the present and future. We simply don’t have the domestic workforce that is needed to service near-term demand levels and investment in training and apprenticeships takes years to come to fruition.

“Without transitional measures, tightening migration rules could increase costs, delay projects, and make it even harder to meet ambitious targets. In Scotland, particularly, this could exacerbate already widely reported skills shortages.”

The BCIS Scottish Tender Price Assessment Panel, which helps to measure the trend of contractors’ pricing levels in accepted tenders in Scotland, agreed that the situation will need to be monitored.

This panel, comprised of cost consultants from firms involved in multiple construction tenders in Scotland, reported an annual increase of 3.4% in tender prices to 2Q2025, citing ongoing skills shortages and limited capacity in the supply chain as impacting pricing levels.