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Tender prices have nowhere left to fall

19 Sep 12 Contractors’ tender prices dropped 2.2% in the first quarter of 2012, according to theRoyal Institution of Chartered Surveyors’ Building Cost Information Service (BCIS).

Tender prices are now just 4% above the low water mark of early 2010, but as input costs have risen by 7% since then, contractors are now at their lowest ebb and have little scope to absorb any further costs, BCIS reckons.

Building costs in Q1 2012 remained largely static compared to the previous quarter, with demand rising by just 0.8%. However, material prices did rise by 2.4% compared with Q1 2011. Material prices generally moved between -1% and +2% compared with the previous quarter, although there were sharper increase in products such as sand and gravel, cement and timber windows, all up 4%, BCIS said.

With the UK economy remaining week and little concrete action from government, BCIS has downgraded its predictions for the construction industry in 2012.

BCIS information services manager Peter Rumble said: “With input costs rising, contractors have little downward flexibility in their tender prices, and we believe they are close to bottoming out. However, this is likely to lead to a modest rise in building tender prices next year followed by further increases throughout the forecast period to the first half of 2017, as demand growth beings to return.”

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