Setting profitable day rates has never felt trickier. Materials, fuel and labour have all moved, and many firms have absorbed rises rather than reset prices. After two years of higher inflation, pricing in construction that once “felt about right” can now leave you working flat out for very little return.
UK inflation is still running ahead of the Bank of England’s target. Consumer Prices Index (CPI) inflation was 3.8% in the 12 months to September 2025, more than double the 2% target (Office for National Statistics (ONS), 2025). At the same time, the official material price index for “all work” was flat year-on-year in November 2024 after a long period of increases (building materials statistics, ONS/DBT, 2025). Costs may not be jumping every month now, but they are still much higher than a few years ago.
Small and medium firms dominate the sector, making up 99.9% of construction businesses (parliamentary written answer drawing on ONS data, ONS, 2024). Most of us do not have big-company cash buffers. Getting pricing in construction right is one of the simplest ways to protect cashflow, stay compliant and still win good work.
Why pricing in construction is under pressure
Construction has been hit by rising input costs, tighter margins and more demanding clients. That shows up directly in pricing in construction, especially on day rates. Common problems we see are the following.
- Old rates: Day rates set three or four years ago that have never been properly reviewed.
- Guesswork margins: Mark-ups based on what competitors “seem to charge”, not on real costs and profit targets.
- Underpriced extras: Variations, snagging and small add-ons thrown in to keep the client happy, which quietly erode the job margin.
- CIS and tax surprises: Contractors forgetting how Construction Industry Scheme (CIS) deductions, VAT and corporation tax will affect what they actually keep.
Inflation is expected to stay above target for a while yet. The Office for Budget Responsibility forecasts CPI inflation of about 3.2% in 2025, before it eases back. If your prices stand still while costs creep up, you are effectively giving away more of your time every year.
A clear, simple approach to pricing in construction day rates helps you cover costs, pay yourself properly and still look competitive.
Know your real day rate cost base
Before we talk about margins, we need to know what a day really costs your business. For most contractors and small firms, the key building blocks are as follows.
- Labour costs: Wages, overtime, employer national insurance and pension contributions for you and any employees.
- Subcontractors: Regular subcontractor costs, including CIS status and any administration time you spend managing them.
- Overheads: Insurance, vans, tools, training, software, office costs and phone contracts.
- Compliance and finance: Accountancy, tax advice, CIS returns, interest on overdrafts or asset finance.
- Downtime: Holidays, sick days, bad-weather days and days spent on quotes, site visits and admin.
If you want help pulling those figures together, our online-first setup means we can review your numbers and cashflow with you wherever you are – start with our home page to see how we work.
Once you have annual totals, turn them into a base day rate.
- Work out how many chargeable days you realistically have in a year once you remove holidays, bank holidays, training and typical bad-weather or non-working days.
- Divide your total annual business costs (excluding materials you recharge to clients) by those chargeable days.
That gives you your “break-even” day rate before profit. For many firms we support, simply doing this exercise shows their current day rate is sitting very close to – or even below – break-even.
Turn costs into profitable day rates
With a clear cost base, you can now design pricing in construction that delivers profit, not just turnover. Try this straightforward approach.
- Set a target profit per day: Decide how much profit you want per day or as a percentage, based on your growth and investment plans.
- Add profit to the break-even rate: Break-even plus profit target equals your core day rate.
- Adjust by job type: Higher-risk or specialist work should carry a higher rate than simple labouring.
For example, suppose your break-even day rate is £260 and you want a 25% profit margin on your labour and overhead element. Your core day rate becomes around £325. For specialist work or smaller, fiddly jobs with more downtime, you might price at £350–£380 instead.
You also need to factor in the following.
- Materials mark-up: You can either charge materials at cost plus a clear percentage, or encourage clients to buy direct while you charge a handling fee. Either way, be upfront.
- CIS and tax: Use current HMRC Construction Industry Scheme guidance to check how CIS deductions affect your cashflow. Build this into your pricing, especially for subcontractors.
- VAT position: If you are VAT registered, remember that customers will compare your VAT-inclusive figure with non-VAT-registered competitors. Your quote letter should explain what is and is not subject to VAT so clients are comparing like with like.
We can model different day rates, mark-ups and tax positions for you so you can see how they affect your personal take-home pay, not just your top-line turnover.
Make pricing in construction clear for clients
The best pricing in construction is simple for the customer to understand. That does not mean it is cheap. It means the client can see what they are paying for and why. Consider building this into your quotes and contracts.
- Clear scope and exclusions: Spell out what is included in the day rate and what counts as extra.
- Agreed variation rates: Put variation day rates and hourly rates in writing so there is no argument when plans change.
- Index or review clause: For longer projects, agree that rates will be reviewed after a set period or if official indices move beyond a trigger point.
When rates are transparent, you are less likely to be squeezed on price at the last minute. You also reduce the risk of disputes or non-payment because both sides know how the bill was built.
Many contractors worry that being clear and structured will scare clients off. In practice, it tends to have the opposite effect: it shows that you run a professional outfit and that the quote is based on real numbers rather than guesswork.
Putting your pricing plan into action
Pricing in construction is not a one-off exercise. After two years of higher inflation, a decent pricing reset can make a big difference, but it only works if you keep it under review. We suggest you do the following.
- Review annually: Look again at costs and day rates at least once a year.
- Track job margins: Compare quoted profit with actual profit on sample jobs to see if your day rate needs more work.
- Protect cashflow: Link your pricing reset to better payment terms and staged invoices so you are not carrying the whole project on your back.
- Get support early: Bring us in before you send out a major tender rather than after the work has gone over budget.
Getting pricing in construction right for the 2025/26 tax year is about more than covering higher costs. It is about building a business that pays you properly, has enough left to invest in tools and people, and can weather any further bumps in inflation or demand.
If you would like a second pair of eyes on your rates and cashflow, we can help you build a simple pricing model, sense-check your margins and link everything back to your personal income goals. Start a conversation today and let us help you fix profitable day rates that support your long-term plans.
