Tender prices to return to pre-crash level in 2017

Tender prices will not make up the 20% eroded during the crash for another three years.

According to the AECOM’s Tender Price Index average annual tender price inflation, across all sectors, will rise by 3.9% this year.

Tender Prices

If tender prices then rise as predicted the UK will have endured a 10-year wait to return to peak construction prices.

Construction inflation figures, which are based on tender movements in the Capital, actually slowed a little in the first quarter of the year.

Competitive supply and install rates for reinforcement (£950- £1,050/tonne); reinforced concrete (£135-£155/m3); steelwork universal sections (£1,400-£1,500/tonne); and steelwork hollow sections (£1,650-£1,850/tonne), remain broadly similar, or only marginally higher to those tendered in mid-2013.

But growing capacity constraints as activity rises in the Capital will feed growth of 3-5% annually, the cost consultant forecasts.

Higher demand for skilled labour has pushed up labour rates, which typically range between £140 to £170/day for bricklayers.

Day rates for joiners have seen recent increases too, and
range between £140 and £180/day.

Simon Johnson, director of strategic projects at AECOM, said: “In the middle of all the good news about the economy, there are obvious concerns about the risk of higher than expected price inflation in the construction industry.

“But our research indicates that in the first quarter of 2014 this is not occurring as quickly as other headlines announcing 7% inflation and £100,000 bricklayers have suggested.

“Whether this is reflective of a shift in the underlying trends, or simply a pause, will become clearer as we move through 2014.”

Between 2008 and 2012 tender prices dropped 20%. Today’s results show that tender prices in Q1 2014 have risen 4.1% since slumping to a low at the end of 2012.

AECOM’s building cost index continues to rise, albeit at a lesser rate of 1.8% year on year in Q4 2013 compared to 3% in Q3 2013.

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