RICS’ Building Cost Information Service (BCIS) monitors UK construction price trends through its quarterly Tender Price Index. Though the latest report, for the third quarter of 2013, shows only modest growth, there is stronger growth ahead, forecasters predict.
BCIS information services manager Peter Rumble said: “We expect tender prices to rise over the next six months. This feeling is reflected in the results of the recent BCIS survey of contractors, where all bar one of the contractors were expecting tender prices to rise over this period.
“With the construction industry expected to recover at a faster rate going forward, it is anticipated that tender prices will continue to rise, rising in the order of 30% over the next five years against a backdrop of an increase in input costs of around 17%.”
Tender prices fell by 0.8% in the third quarter of 2013 compared with the previous quarter, but rose by 6.3% compared with the same quarter in 2012. However, the strong year-on-year rise is exaggerated by a significant fall in tender prices in Q3 2012, a result of the volatility in prices seen in 2012, when tender prices were bottoming out. The settling down at the higher tender price levels, seen at the beginning of 2013, is regarded as a reaction by contractors to unsustainable contractor margins.
The total volume of construction output rose by 3% in Q3 2013 compared with the previous quarter, and by 6% year-on-year. The volume of construction orders in the UK remained unchanged in Q3 2013 compared with the previous quarter, but rose by 18% compared with a year earlier.
Analysis of the new work sectors shows that most sectors had increased output in Q3 2013 compared with Q2. The private commercial sector had the highest increase at 7%, but output fell by 5% in the private industrial sector.
Comparing the new work sectors in Q3 2013 with the same quarter in 2012, shows that output rose by 9% in the public housing sector, by 17% in the private housing sector, and by 14% in the private commercial sector. Output fell in the infrastructure, public non-housing and private industrial sectors, by 1%, 2% and 10% respectively.
Materials prices fell by 0.8% in Q3 2013 compared with Q2 2013, but remained unchanged year-on-year. Average weekly earnings in the construction industry rose by 1.4% in Q3 2013 compared with a year earlier, faster than in the economy as a whole, where they rose by 0.7%.
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