Mace Cost Consultancy maintains its forecast for UK tender cost inflation in 2016 at 4.0% but it expects this to fall to 3.5% in 2017 and 3.0% in 2018.
Previously Mace was forecasting tender inflation of 4.0% for 2017 and 3.5% for 2018.
The firm said that there were several factors contributing to economic uncertainty, including the EU referendum in June and the anticipated impact of the introduction of the Living Wage earlier this month. And while demand has softened slightly, UK construction has expanded its capacity to address shortages and meet demand.
Mace’s forecast for London also remains at 4.0% for 2016 based on current workloads, but expects this to mirror the national picture during the following two years, falling to 3.5% in 2017 and 3.0% in 2018. Although commercial and residential workloads are robust, Mace said, clients are becoming less confident about future projects.
Mace Cost Consultancy managing director Chris Goldthorpe said: “With recovery in both the UK and global economies stalling in recent months and the uncertainty caused by the upcoming EU referendum, we are seeing a growing lack of confidence among several clients. The optimism of some business cases produced only a few months ago are now being called into question, bringing a greater focus on project viability.
“Over the next two years, we expect to see more competition in the market with more contractors willing to participate in single stage tenders. However, major and complex projects will always require collaborative procurement to obtain best value on the project.”