The tender prices report shows little cause for optimism in the construction industry as the hoped-for increase in the first quarter of 2019 fails to occur
The latest quarterly tender cost forecast from Mace shows that tender prices in the UK construction industry are unlikely to grow significantly in 2019.
Total growth in the construction industry was only 0.7% in 2018 and, although this pushed output to a record high, it was also the slowest growth rate since 2012. This slowdown, along with high levels of uncertainty, will have given contractors and subcontractors limited scope when it came to raising tender prices last year.
In many cases, input inflation will have far outstripped tender price increases. A weakening in both earnings growth and material price inflation at the end of the year may have helped combat some of these pressures.
Brexit uncertainty means the environment is unlikely to improve in the short-term, and while the easing in both labour and material inflation should continue this year, contractors and sub-contractors still won’t find it easy to pass on higher tender prices.
Mace has left its future predictions unchanged for 2019, 2020, 2021 and 2022. These are as follows:
| 2018 | 2019 | 2020 | 2021 | 2022 | |
| National | 1.5% | 1.5% | 2.0% | 2.5% | 3.0% |
| London | 1.0% | 1.5% | 2.0% | 2.5% | 3.0% |
Steven Mason, Managing Director, Cost Consultancy commented: “While fluctuating levels of growth from one quarter to the next has done little for market confidence, it has failed to suppress increases in overall input costs, with labour costs in particular continuing to rise, albeit at a slower rate.
“We expect this to result in a modest increase in tender prices in 2019, but the continued uncertainty surrounding Brexit and the global economy as a whole will inevitably have a major part to play as we move into the second quarter.”
