London’s main contractors have been facing growing strain in mechanical and electrical (M&E) delivery with data centre demand stretching specialist subcontractor capacity, according to a new industry survey.

The latest London Main Contractor Survey 2026 by consultancy Aecom found that shortages in M&E trades was one of the most acute pressures on tier one and tier two contractors last year.

Aecom warned: “Demand for new data centres is straining the already deeply limited availability” of mechanical, electrical and plumbing (MEP) subcontractors.

The consultancy said this problem was causing higher tender prices in London and reduced choice within supply chains, as contractors compete for a constrained pool of specialist firms.

Aecom said the severity of the issue had prompted some main contractors to rethink how M&E services are delivered.

“Such is the extent of the problem, some of the contractors we spoke to are building in-house MEP delivery teams to use on their own schemes,” it added.

The report said the move reflected a labour shortage on London jobs rather than a shift in procurement preference, with contractors seeking to reduce exposure to supply chain risk on complex and services-heavy projects.

Rob Driscoll, director of legal at the Electrical Contractors Association, told Construction News that MEP can account for as much as 40 per cent of a project’s value, but for data centres “this percentage will be much higher because the assets involve more complex cooling, power distribution, redundancy and specialised infrastructure”.

He added: “It is no wonder there is limited supply of MEP specialists with a proven track record.”

Driscoll described a twofold risk for a tier one firm self-delivering a complex data centre project: the cost of buying in the necessary technical expertise, and the need to effectively self-insure against the risk of failure.

Looking beyond M&E, the Aecom report described shortages of other skilled labour, while residential output remained subdued and commercial new-build activity lagged behind earlier peaks.

The labour shortage “raises serious questions about how the industry will cope when activity levels rise again, particularly from 2027 onwards”, it added.

Overall contractor confidence “remains subdued for the short term”, although firms reported a more positive outlook beyond 2026 with a “sustainable, healthy pipeline in the medium term”, Aecom said.

“Industry expects a recovery in 2027 and 2028, as many preconstruction services agreements are due to transition into active [work].”

The report said tier one firms tendered for just over 70 per cent of the enquiries they received in 2025.

The consultancy said this signalled “a return to a more competitive market”, despite the lack of active residential work.

It added that tender activity of 60 to 70 per cent was “typical when the market is not experiencing any major shocks”.

The survey covered tier one and tier two contractors with a combined turnover of £6bn, all working on schemes valued at more than £50m in the London market.

 

***END***

Disclaimer:  DATACENTRE.ME may not be held responsible or liable for the content or details within this news article.

For further information, please refer to the full details of this article via the original source here.