Mace has predicted that tender prices could grow by 1.5% in 2020, in line with its previous estimates, but warned that Brexit uncertainty and global issues risked exerting downward pressure in the future.
The firm’s latest tender cost forecast for the third quarter of this year held steady at 1.5% but its cost consultancy team warned that Brexit and issues like the US-China trade war could “drive challenging industry behaviours” and put pressure on prices.
Among other concerns, the report also highlighted a weakening labour market and currency fluctuations – particularly the depreciation of the pound – as two areas of concern, while it said that a ‘no deal’ Brexit had the potential to “significantly disrupt” the construction supply chain.
Tender cost inflation forecast 2019-2023 (Source: Mace)
Despite the fact that the UK construction industry as a whole contracted 1.3% in Q2 and GDP fell 0.2%, new orders in construction rose to 9.6% and material price inflation eased to 3%, its lowest level since 2016.
As a result, Mace predicted a 2.5% growth in tender prices in 2021, provided there is a Brexit deal and the transition process runs smoothly.
Steven Mason, managing director for Mace Cost Consultancy, said: “The overriding sense of unease in the UK construction market continues as the impact of Brexit uncertainty, domestic political turmoil and global economic concerns take their toll. While there is a growing appetite to secure workload for 2020, for now tender prices remain steady as the downside risks continue to be offset by strong input costs.
“However, the likely impact of a No Deal Brexit will put more pressure on the supply chain. As the combination of potential reduced demand with further increases in material and labour costs will inevitably affect margins, tender prices will feel a downward pressure.”
