Cost update: March 2004

<b><font size="+2">Hot Rates: Waterproofing</font></b>
This quarter's edition of Hot Rates examines current costings for waterproofing.
The rates shown on the right are averages from successful competitively bid tenders received over the last three months, for medium-sized building projects in the £1-10m total value range. Typical high, low and mean rates are given for each item.
Tender prices in London and the South-east have been under less pressure than in most other regions over the last year but prices are still generally higher than elsewhere. The typical high rates may be expected to apply to projects in outer London or the South-east, the typical mean rates may currently be found in the Midlands and the typical low rates may be more likely in northern England or Scotland.
The rates are for Standard Method of Measurement of Building Works level items and are representative of schemes with straightforward access. Rates include overheads and profit but exclude any allowance for preliminaries. Within regions and between projects, rates can vary considerably.

<B><font size="+2">Building materials</font></b>
<B>Consumer price inflation </b>
The consumer prices index is now the main UK domestic measure of inflation for macro-economic purposes. It has taken over from the retail prices index as the measure adopted by the government for its UK inflation target: the Bank of England's Monetary Policy Committee is required to achieve a target of 2%, subject to a margin of one percentage point on either side. Prior to 10 December 2003, the CPI was published in the UK as the harmonised index of consumer prices (HICP), the index calculated by each member state of the European Union for European comparisons. The UK inflation rate remains below that of most European countries: in December the annual rate in the UK was 1.3% compared to the EU 15 average of 1.8%.
Inflation as measured by the CPI has been fairly steady, the annual rate varying only between 1.0 and 1.6% since July 2002. However the table right shows that inflation in the past nine months has been limited to 0.4%. The previous headline rate index, the retail prices index, shows inflation in the past year at 2.6% but, similarly, a much lower 1% over the past nine months.
The previous government target index, the RPI excluding mortgage interest payments (RPIX) and the RPIY, also excluding indirect taxes, both show similar patterns of subdued inflation in the past nine months.
<B>Input costs and output prices</b>
The price of materials and fuel purchased by manufacturing industry has shown no overall change over the last twelve months, though fuel costs have risen by 20% since August 2003. However, this is a normal seasonal swing in fuel prices which are likely to fall between now and the end of the summer.
Output prices generally have been fairly steady over the last year: excluding food, beverages, tobacco and petroleum products, the annual output price increase has varied only between 1.1% and 1.5% since February 2003.
<B>Metal prices</b>
The most significant figures right relate to metal prices (see table). Global economic recovery has fuelled strong demand for raw materials but demand from China in particular has been blamed for the surge in metal prices. Copper prices have also been underpinned by production problems at the world's largest copper mines in Indonesia and Chile and world stockpiles of copper have fallen by more than 40% over the last year. Copper prices are at their highest for eight years and analysts expect prices to continue to rise during 2004. Lead prices continued to rise during February and prices had doubled between the start of 2003 and mid February 2004.
<B>Construction materials</b>
DTI figures show that construction materials rose 2.3% over the year to December 2003, with housebuilding materials increasing 2.5% (see table).

<B><FONT size="+2">Price adjustment formulae for construction contracts</font></b>
Price adjustment formulae indices were designed for the calculation of increased costs on fluctuating or variation of price contracts. Indices are published monthly by The Stationery Office. They provide guidance on cost changes in various trades and industry sectors and on the differential movement of work sections in Spon's Price Books.
Over the past six months, between July 2003, following the building industry wage award, and January 2004 the average movement in the 60 building formula work categories has been an increase of 0.9%. Nine work categories show small decreases, including the changes shown right.
The majority of work categories showing the highest percentage increases over the last six months relate to categories involving a significant metal input. This is the result of the increase in metal prices that has occurred over the last 15 months. Further price increases in these work categories can be expected in the forthcoming months.

<B><font size="+2">Labour rates: Electricians and plumbers</font></b>
<B>Electricians</b>
On 5 January, Joint Industry Board national standard rates for electricians increased 7.2% and London rates went up 8.2%. These rises represent the third and final part of a three year industrial determination promulgated by the Joint Industrial Board for the Electrical Contracting Industry in July 2001. These percentage increases applied to both operatives who are transported to and from the job by their employer or who travel by their own means to and from the job. Basic rates for electricians have risen 18% nationally and 22% in London since the end of 2001.
Daily travel allowances and daily travelling time payments also increased from 5 January but only 2%. The new hourly rates are shown below. Hourly rates for apprentices have risen by similar percentages.
The JIB has a separate rate for operatives who are employed permanently at the shop and do not work on site. These rates have also risen 7.2% (national) and 8.2% (London). The rates are, on average, 7.5% lower than the transport provided rates below.
The Scottish Joint Industry Board for the Electrical Contracting Industry have had a parallel three-year wage settlement in place since July 2001. Their agreement does not recognise the transport provided category but their shop rates equate to the JIB national standard shop rates and their travel rates to the JIB own transport rates shown below. Shop rates are payable to operatives who are required to book on and off at the employer's shop; travel rates are payable to operatives who are required to start and finish at the normal starting and finishing time on jobs. Wage rates increased 7.2% from 5 January.
<B>Plumbers</b>
The Joint Industry Board for Plumbing Mechanical Engineering Services in England and Wales determined a two-year pay agreement last September. The first part of the deal came into effect on 5 January, lifting basic hourly rates of pay by 6%. The rates for the principal grades of operative are now:
Technical plumber and gas service technician £11.34
Advanced plumber and gas service engineer £10.21
Trained plumber and gas service fitter £8.75
Employers may enhance the basic graded rates of pay by an additional amount where work involves extra responsibility, productivity or flexibility in accordance with the following bands:
Band 1 – an additional rate of 24p per hour
Band 2 – an additional rate of 44p per hour
Band 3 – an additional rate of 64p per hour
Band 4 – an additional rate of 84p per hour
These payments are payable either on a contract-by-contract basis or on an annual review basis, and have been in force since September 2001. Welding supplements and travel, mileage, subsistence and lodging allowances also remain unchanged.
From 5 January 2005, rates of pay for operatives, apprentices and trainees will rise a further 6%.
In Scotland and Northern Ireland, the Scottish & Northern Ireland Joint industry Board for the Plumbing Industry promulgated a two-year wage deal in November 2003. The first part of the deal comes into effect on 22 March 2004 when wage rates will rise 5%.