Tender Prices Continue to Fall but Construction Orders Show Signs of Recovery
Published 29th July 10
Tender prices fell again in Q1 2010 according to the latest UK Construction Tender Price Index compiled by BCIS.
Tender prices have now fallen 16% from their peak in Q4 2007.
With nationally agreed wage rates rising 1.9% and materials costs rising by 1.7% in the year to Q1 2010; the fall in tender prices shows the mounting pressure on construction firms to secure work.
However, some signs of an industry emerging from a recession are apparent; new orders for construction rose by 1% in Q1 2010 compared with Q4 2009 and by 29% compared with Q1 2009. Orders have also risen for four consecutive quarters.
New work output is expected to fall at a much slower rate in 2010 than the sharp fall experienced in 2009, and be followed by two years of very modest growth. It is anticipated that in 2010, the private sector with continue in recession, but public sector work will continue to grow. Growth in the infrastructure, private housing and private industrial sectors should support a modest return to growth in total new work output in 2011. A return to growth in the private commercial sector in 2012 will help to contribute to growth in new work output as output in the public non housing sector continues to fall away more steeply.
Meanwhile the industry remains stoic; a recent BCIS survey of contractors showed that the majority were expecting tender prices to remain static over the next six months.
Peter Rumble, Information Services Manager at BCIS comments:
"There are some concerns that private sector output growth will not have gained enough momentum in time to outweigh the cuts in public spending; a scenario that could lead to a 'double dip' or prolonged recession in the construction industry. However, currently BCIS is expecting a further small fall in tender prices in Q2 2010, followed by stagnation in prices for the remainder of the year. A small rise in tender prices is expected in the year to Q2 2011, rising more or less in line with input cost increases over the following year, as a slow recovery in new work output gets underway."
The full report 'Indices and Forecasts' can be ordered online at www.bcis.co.uk/tpi
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