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Sun January 26 2020

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Arcadis downgrades inflation forecasts

7 Jan Quantity surveyors at Arcadis have downgraded their forecasts for 2020 tender price inflation.

Arcadis predicts tender prices for building works will rise just 1% in London this year, compared to its previous forecast of 3%. Across the regions, it had also previously been predicting 3% inflation in tender prices but this has now been downgraded to 2%.

Previous forecasts did not anticipate the continuing stultifying effect of Brexit uncertainty on the UK construction industry. However, Arcadis remains confident of activity increasing in the years ahead, now that the country is run by a government with a workable majority.

Arcadis has raised its projections for 2022 and 2023 tender price inflation for building works from 4% previously to 5% – both in London and the regions.

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How quickly the public sector can turn stalled programmes from 2019 into shovel-ready projects will have a critical role in determining short-term price levels, it says.

Surveys suggest that construction order books are at their shortest since 2012 but Arcadis maintains that the current slowdown is steady and is set to bottom out. Workloads are likely to improve from late 2020 onwards, Arcadis believes. “In contrast to 2008, we think that the current slowdown in workload is steady and has a floor. This means that deflationary pressures should be modest,” the company’s winter 2020 UK Construction Market View reports.

Simon Rawlinson, head of strategic research at Arcadis, said: “The new year brings potential for some much-needed transformation in the industry. We have long been calling for certainty and clarity on a long-term investment plan, yet alongside the prospect of increased infrastructure spending we also need to be aware that the government will want to get a lot more bang for its buck now. This means delivering in a way that is consistent with government strategies like the presumption for offsite construction, working in integrated teams and shifting industry thinking to make full use of innovative building technologies to increase performance, productivity and value.”

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