Data centre operators planning builds in London may face continued cost and programme pressure in 2026, as demand for specialist mechanical, electrical and public health (MEP) subcontractors outstrips supply.

That’s according to AECOM’s latest London Main Contractor Survey, which polled main contractors with a combined turnover of £6 billion. The report suggests the market has become more competitive, but not cheaper, with the majority of contractors maintaining margins and passing on labour and material price increases through tender pricing.

AECOM also points to higher-than-average inflation of 3% (versus HM Treasury’s 2.2% forecast) and rising skilled and unskilled labour costs as factors behind low short-term confidence among contractors – conditions that typically hit MEP-heavy projects first.

Most notably for data centres, the survey says rising demand is ‘straining the already deeply limited availability’ of MEP subcontractors, driving up prices and competition. It adds that some contractors are responding by developing in-house MEP capability to support projects.

“Inflation and labour shortages continue to hamper an increasingly competitive London construction market” said Brian Smith, Head of Cost Management and Commercial at AECOM. 

“This year’s survey shows contractors are balancing the need to secure work with managing risk exposure. As competition intensifies, some are prepared to take on greater risk, such as committing to long programme durations, to win work, while others are prioritising lower-risk opportunities with trusted partners. The challenge for 2026 will be maintaining stability by strengthening the industry’s resilience and labour capacity ahead of what is expected to be a dynamic 2027.

“One growing trend we’ve identified this year is the trialling of AI by contractors. If AI becomes more deeply integrated in their operations, the potential benefits are likely to accelerate rapidly as contractors look for new ways to drive efficiencies.”