2Q2023 estimate of Tender Price Inflation

The early estimate for the BCIS All-in Tender Price Index (TPI) shows a 1.1% increase between 1Q2023 and 2Q2023.

The resultant 2Q2023 TPI figure shows an increase of 4.9% in the year from 2Q2022¹.

The estimate is the consensus of the BCIS TPI Panel² based on the analysed Delphi survey results, it does not necessarily represent the views of individual participants.

The range of responses reported on the tender price movement question was between 0.0% and 1.5%. The median stood at 0.95% and all panellists agreed on 1% as a consensus figure for 2Q2023.

The panel reported Overheads and Profit at 5.3%, slightly down on 5.5% last quarter.

The panel members felt that the market was at a turning point, with both costs and work slowing down. There was more competition, but contractors were still cautious when choosing projects. It was noted that the slowdown in the private sector with developers pausing projects has meant that the private sector supply chains are now focussing on the public sector increasing capacity and competition.

In general, the panel reported stabilising materials cost inflation. However, there are still pressures in the M&E sector. There is a shortage of skilled labour which puts pressure on rates. However, the heat is coming off with the growth in agency pay rates slowing down according to Hays/BCIS site wage cost indices. This also includes weekly pay rates as reported by the Hudson Contract.

Concerns were raised around contractors’ insolvencies. The general consensus across the panel was that this isn’t going to change soon. The cost of finance and fixed-price contracts are putting some contractors at risk.

Several panellists raised a concern on the impact of the implementation of the second staircase rule. Large regeneration projects that include high-rise residential developments (more than 10 storeys) have stopped. The second staircase rule which is currently compulsory in London and Scotland is expected to impact residential developments in larger cities, specifically London, Manchester, and Birmingham.

¹ Note: the BCIS TPI Panel estimate has been applied to the previous quarter index and rounded to the nearest whole number for publication.

² The BCIS TPI Panel. BCIS has recruited a panel of practising cost consultants from firms involved in multiple tenders in each quarter to provide an early estimate of tender price movement in the latest quarter based on a panel (Delphi) survey approach. For further details see: BCIS Tender Price Index Panel.

Basis of All-in BCIS Tender Price Index. TPI figures prior to 4th quarter 2018 are based on project indices, generally single stage, traditional procurement, average value < £5million, (minimum £100,000, no maximum). Excludes M+E and other specialist trades, e.g. facades. BCIS has assumed this reflects market projects let on single-stage Design and Build and Specification and Drawings. Indices are normalised for location, size and procurement. Percentage changes are mid-quarter to mid-quarter.

The current BCIS TPI Panel members are:

Adam Reeve, Calfordseaden

David Happell, Exigere

Don Patterson, Equals Consulting

Gavin Murgatroyd, Gardiner & Theobald

Ian Aldous, Mace Group

James Garner, Gleeds

Mark Lacey, Alinea

Max Wilkes, F+G

Nicola Sharkey, Gleeds

Nigel Hawes, Exigere

Pablo Cristi Worm, Turner & Townsend

Peter Maguire, WT Partnership

Rachel Coleman, Alinea

Richard Baker, Baily Garner

Richard Hill, Currie and Brown

Roger Hogg, Rider Levett Bucknall

Simon Cash, Artelia

Simon Rawlinson, Arcadis

Steve Waltho, Turner & Townsend

Stuart Wigley, Baily Garner

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