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Decline in construction tender prices slows

20 Oct 10 Tender prices fell again during the second quarter of 2010, but the decline has slowed dramatically over the last year, according to the latest UK Construction Tender Price Index compiled by BCIS.

Tender prices fell again during the second quarter of 2010, but the decline has slowed dramatically over the last year, according to the latest UK Construction Tender Price Index compiled by BCIS, the Building Cost Information Service of RICS.

There was a fall of 13% in the Index over the year to Q2 2009, but a fall of just 4% for the 12 months to Q2 2010. Tender prices were down just 0.5% in Q2 2010 compared to the previous quarter.

A recent BCIS survey of contractors showed the majority are expecting tender prices to remain static over the next six months.

The upward push of increases in resource costs is competing with the downward pull of uncertain future demand.

Material prices rose by 3.8% in Q2 2010 which is a 6.5% increase on 2009. The costs of some materials, including concrete reinforcing bar, ceramic tiles, and fabricated steel work, continue to climb.

Sharp increases in annual materials prices are expected through to Q2 2011.

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Employment figures within the construction industry rose 2.6% from Q1 to Q2 2010 but were still 3.3% down on the same period in 2009.

Average earnings within the construction industry remained unchanged in Q2 and nationally agreed wage rates are expected to rise just behind the rate of inflation until Q3 2011.

Construction orders fell by 14% in Q2 2010, with all sectors in decline except the industrial sector which rose by 26%.

However, current levels of demand are holding up, with new work output rising by 9% in the first half of 2010 compared with the same period in 2009.

New work output is now expected to grow strongly in 2010, with output slowing to marginal growth in 2011 as public spending starts to fall away, but private sector output starts to recover more strongly. Slow growth is expected in 2012 as public spending cuts deepen.

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