Construction tender prices keep falling

Its quarterly Market View report, which tracks tender prices in the UK property and infrastructure sectors, predicts that the continued uncertainty across Europe will continue to impact the UK economy and hurt the construction sector.

Nationally, tender prices are expected to fall by 2.5% in the year to the second quarter of 2013 before rising by 1.8% the following year. Tender prices are expected to increase to 3.5% in the year to the second quarter of 2015.

Paul Moore, head of cost research at EC Harris, said: “With the UK economy back in recession and Eurozone recovery strategies still not boosting market confidence, the pressure on contractors can only increase.

“Although Sterling remains strong, this is unlikely to have a positive impact on market price until the Eurozone crisis is resolved. Clients therefore need to be cautious when relying on the current Euro exchange rates when making cost plans and ensure that they are protected against the potential insolvencies of their sub-contractors who may have overstretched whilst trying to take advantage of favorable rates.”

The difference in activity levels between London and the rest of the UK is expected to continue. In London, potential workload in the commercial offices sector and a continued demand for high quality residential schemes means that the fall in tender prices is expected to turn around in the first quarter of 2013 and the forecast is that tender prices will rise by 0.5% in the year to the second quarter and by 3.5% the following year.

A further 4.6% increase is expected in 2015. Whilst there is a strong pipeline in London, with orders increasing by 8%, away from London the commercial office market is stagnating with fewer potential projects.

The forecast for infrastructure is that tender prices will rise by 1.7% by the second quarter of 2013 and continue to rise to 2.4% over the following year. Thereafter the expectation is that tender prices will rise by 3.4% in 2015 and by 4% over each of the following two years.

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