UK construction tender prices fell by 1.3% in Q3 2012 compared to the previous quarter, but were up 0.9% compared to Q3 2011.
These numbers come from the Tender Price Index compiled by The Building Cost Information Service (BCIS) of the Royal Institution of Chartered Surveyors (RICS).
With new construction work also continuing to fall, tender prices were expected to remain on a downward trend for the remainder of 2012 and first part of 2013. However, with input costs having risen by 7% and tender prices by 6% since 2010, contractors’ margins are thought to be severely limited, with little downward manoeuvrability. BCIS is therefore forecasting tender prices to rise from mid-2013 as contractors become unable to continue absorbing high input costs.
According to BCIS, Q3 2012 saw total work output fall 11% compared with a year earlier and 3% compared with the previous quarter. New orders were also down significantly on the previous year, although up 5% on Q2 2012.
Building costs remained stable in the period compared to the previous quarter, but rose by 0.6% compared to a year earlier. There was some relief for contractors with materials prices falling by 0.8% in Q3 2012 compared to the previous quarter and by 0.4% compared to Q3 2011. For the construction sector as a whole, average weekly earnings (AWE) remained unchanged in Q3 2012.
BCIS information services manager Peter Rumble said: “The construction sector is continuing to struggle through difficult times with yet another dip in tender prices further tightening contractor margins. However, as contractors can no longer absorb costs, we anticipate this trend to begin reversing in mid-2013 and continue rising until the end of BCIS’ forecast period in 2017.
“With government cuts continuing, the public non-housing sector will remain one of the hardest hit sectors. Extra support for the private housing sector including ’FirstBuy’ and ‘Get Britain Building’ schemes as well as the relaxation of Section 106 agreements is welcome and should help to stimulate growth in this sector. However, one of the key constraints remains the availability of finance to housebuilders and homeowners, which will hopefully be addressed through the Funding for Lending Scheme.”
Tender Price Inflation
(Year-on-year percentage change)
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