Clients should stay vigilant as the industry prepares for an upsurge in construction spending, warns new Turner & Townsend report
The report forecasts that the Tender Price Inflation (TPI) for real estate and infrastructure to be at 3.0% and 4.5%, repectively.
Construction spending is set to increase
As we approach the new Labour government’s first autumn budget, more sophisticated commercial models will be essential to keeping the government’s construction plans on track.
The confirmation of Labour’s plans and budget will embolden the construction industry, as it will give it a clear direction for the foreseeable future.
This is reflected in a positive market sentiment, with a 16.5% increase in new orders in Q2 2024.
However, labour shortages, caused by unoptimised commercial models, are causing a downturn in programme delivery.
Therefore, it is advisable to aim for more equitable transfers of risk and procure more partnerships than suppliers to attract better-quality bids and work better with the supply chain.
Clients should remain vigilant
Martin Sudweeks, UK managing director, cost management, Turner & Townsend said: “It is encouraging to see confidence in the sector beginning to return as we find some relief in the form of lower interest rates and a rise in new orders. However, despite the cooling of tendering conditions and general weakness of the construction sector, this is far from a buyer’s market and businesses will need to be careful about how they manage risk to deliver major programmes successfully.
“As we head towards the Chancellor’s budget this Autumn, organisations should be looking to establish sophisticated commercial models that can balance the risk and reward for both the client and suppliers. Careful apportioning of risk, while promoting incentivisation and collaboration, will be the keys to success as we deliver the next generation of transformative real estate and infrastructure projects for the country.”
