This means that Mace has maintained its forecast for tender cost inflation nationally in 2015 at 4.5%, with increases of 4.0% are expected in 2016 and 2017.
While the forecast for London is retained with inflation of 5.5% expected in 2015 followed by 4% in 2016, the 2017 forecast has been revised up to 4%. This is because demand is expected to remain robust in the capital but price increases are forecast to remain stable as construction costs will have increased significantly and affordability is expected to become a factor in client demand.
With the prospect of five years of political stability following the general election and economic growth well established, the outlook for the construction industry is good, Mace says, with inflation under control and interest rates likely to remain at low levels for some time to come.
With economic growth for 2015 forecast to be 2.5% compared to the 3.0% recorded in 2014, the company expects growth in construction output to also moderate from the rapid expansion seen over the last two years return to more manageable levels, in line with the wider economy.
Mace Cost Consultancy managing director Chris Goldthorpe said: “A strong foundation and steady growth have been achieved across the market and contractors have a wide range of opportunities open to them in the short to medium term. While demand for delivery flourishes it reinforces our concern that supply will not match this in the same timeframe. A diminishing number of contractors, sub-contractors and supply chain partners impacts competition and makes complex and riskier projects challenging for clients to secure in the market.”
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