Tender prices rose 0.5% in Q4 2010 compared to the previous quarter, according to the latest UK construction Tender Price Index compiled by the Building Cost Information Service (BCIS) of the Royal Institution of Chartered Surveyors. Compared with the same quarter a year earlier, tender prices rose by a total of 2.8% in Q4 2010.
This demonstrates the bottoming out of tender prices within 2010, said BCIS. It anticipates a continued slow upward trend over the coming two years, which will be driven by increases in input costs.
Material costs remained unchanged from Q3 to Q4 2010 but they rose 6.8% over the year. It is anticipated that material prices will rise quite sharply in the first half of 2011 with rises in steelwork prices, copper, lead, and aluminium feeding through, combined with pressures from rising oil prices.
The fourth quarter of 2010 saw no change in construction employment figures on the previous quarter but saw a 2% fall compared to a year earlier. Despite average weekly earnings in the economy as a whole rising 2.2% in Q4 2010, average weekly earnings within the construction fell 1.4% over the same period. Nationally agreed wage rates saw a 1.7% increase, and BCIS anticipates wage awards will remain subdued over the next two years, with workloads remaining significantly below pre-recession levels.
Analysis of new work output in Q4 2010 compared with Q4 2009 shows that all sectors had double digit increases in output except infrastructure which saw a 1% fall. The public housing sector saw the greatest movement with an increase of 37% compared to the previous year, but this sector only represents around 7% of total new work output. However, the recently released preliminary estimate of gross domestic product for Q1 2011, shows total construction output falling by 5% in Q1 2011 compared with the previous quarter, following a fall of 2% in Q4 2010.
New work output is expected to fall in 2011 and 2012 as public spending cuts start to take force, this fall will be partly mitigated by private sector output starting to recover in 2012 and 2013. This decrease may also be further mitigated by anticipated growth in the infrastructure sector over the next three years, albeit slow in 2011.
BCIS information services manager Peter Rumbles said: “Tender price falls would seem to have bottomed out in 2010, with tender prices having risen over each of the last three quarters, and despite new work output being expected to fall in 2011 and 2012, it is anticipated that tender prices will continue on a slow upward trend over the next couple of years, driven by increases in input costs. The fate of the construction industry is very much dependent on the timing of a private sector recovery. ”
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