Margins set to improve as tender prices keep rising
Tender cost inflation is set to remain at 4.5% for the rest of the year with most of the increase set to appear on contractors’ bottom lines.
The latest UK tender price update also predicts increases of 4% are in 2016 and 2017 as continued construction demand pushes tender prices well above the level of general inflation.
Mace said: “With input cost inflation at low levels, it is increasing margins that continues to be the main driver behind any tender price increases, and the demand from a growing economy remains robust enough to generate the current price increases.”
The forecast for London is 5.5% this year followed by 4% in 2016 and 3.5% in 2017.
Demand will remain robust in the capital but price increases are forecast to moderate after nearly two years of strong growth which has increased construction costs significantly.
Chris Goldthorpe, Managing Director for Mace Cost Consultancy, said: “The growth of the construction industry in London is well established and the market is stabilising, although complex or bespoke projects are still attracting a premium.
“We are now seeing a similar pattern developing in other regions where supply chain constraints and risk aversion has led to reduced competition, particularly for major projects, where the choice of procurement method is critical to achieving value for the client.”
Grant Prior | Tue 28th April | Construction Enquirer