The quarterly report, which tracks tender prices in the UK property and infrastructure sectors, predicts that the slow recovery in the UK, Europe and US will continue to impact construction workloads and maintain the pressure on tender prices. EC Harris forecasts that as a result of this, tender prices will fall nationally by 1.1% in the year to the second quarter of 2012 before finally rising by the first quarter of 2013 by 0.5%. Following this EC Harris anticipates that prices will remain very flat, with no significant rise until early 2015.
EC Harris head of cost research Paul Moore said: “The fragile UK economic recovery has created a lack of confidence which is affecting the construction industry’s workload. Where workload leads, for example in London, prices will follow eventually. However, clients buying at low tender prices now should be aware of the potential for supply chain failure as contractors seek to deliver on low tenders in the face of rising costs.”
The Market View warns that while the surge in global commodity prices in 2010 has now slowed, steel and oil prices are still higher than they were in January. Prices for ready-mix concrete, steel and rebar delivered to site are up 10%, 8% and 5% respectively since this time last year, although steel prices have fallen by 3% over the last quarter. This is putting further pressure on contractors’ margins.
The difference in activity levels between London and the rest of the UK is expected to continue over at least the next two years. Workload in London is being boosted by activity in the commercial office and residential sectors, but the rest of the country is slow with very few major schemes in the pipeline.
Due to the different cost drivers involved, tender prices in the infrastructure are still predicted to show an increase in the third quarter of 2011 and rise by 3.2% to the second quarter of 2012, with a further rise of 3.8% over each of the following two years.