Although the economic turmoil of the Truss premiership has been allayed somewhat by the Autumn Statement, some ramifications remain, and these are still uncertain times. A recession combined with high inflation provides a bleak outlook for construction over the next two years.
Tender prices in 4Q2022 rose by 1.1% compared with the previous quarter, and by 7.6% on an annual basis. Although the supply of construction materials has overall stabilised, inflationary pressures driven by rising energy prices remain, significantly impacting products that involve energy-intensive manufacturing process.
Construction demand is forecast to shrink, and with fewer opportunities in the market as well as the overall economic uncertainty there will be greater keenness to secure work. Although materials’ prices are expected fall in the short term, current inflationary pressures will keep labour costs rising, resulting in increases in both costs and tenders. Tender prices are forecast to grow more slowly than input costs over the next two years as contractors seek to fill order books, and it is not until the last two years of the BCIS building forecast period that margins and output are expected to recover.
Tender prices are likely to be supressed in the first two years of the forecast due to reduced demand; but are expected to rise faster than costs in 2026-2027. Tender prices are forecast to rise by 13% in the five years to 4Q2027.
The full forecast of prices, costs and demand is available in the Briefing section of the BCIS online service BCIS Online – Building Cost Information Service Online.