Building costs rose at the end of the year due largely to a change in holiday pay rules, but material prices remain steady. Peter Fordham of Davis Langdon, an Aecom company reports


  • All construction cost measures have reversed their decline but largely due to withdrawal of National Insurance concession on holiday pay
  • Consumer price inflation is on an upward trend as a result of government decisions on university fees and utility requirements
  • Industry input and output cost inflation are both benign
  • Recent sterling deflation may result in inflation in imported construction materials, metals and oil prices
  • Construction materials prices were subdued throughout 2012
  • Steel prices declined in second half of 2012 but are rising at start of 2013
  • Most construction operatives secure small wage increases at start of 2013

The following chart shows how Davis Langdon’s index series, reflecting cost movements in different sectors of the construction industry, have fared since 2000, with the movement of the Consumer Prices Index for comparison.

Building cost index1.6
Mechanical cost index0.5
Electrical cost index0.8
Consumer prices index2.7
(Fourth quarter 2012 figures are provisional)  


Building cost index
The index jumped 1.3% in the final quarter of 2012, largely because of the withdrawal of the National Insurance concession on holiday pay schemes.

Mechanical cost index
Materials prices were declining as the year ended but increased National Insurance payments on payrolls pushed the index up.

Electrical cost index
There was a further drop in materials prices at the end of the year but the end of the National Insurance concession also increases electricians’ employment costs.

Consumer prices index
Jumped 1.2% in the fourth quarter, largely due to higher university tuition fees and gas and electricity bills. The annual rate of increase remained at 2.7% in January but cheaper clothing and footwear brought the index down by 0.5%.

Guide to data

Davis Langdon’s cost indices track movements in the input costs of construction work in various sectors, incorporating national wage agreements and changes in materials prices as measured by government index series. They provide an underlying indication of price changes and differential movements in the various work sectors but do not reflect changes in market conditions affecting profit and overheads provisions, site wage rates, bonuses or materials’ price discounts/premiums. Market conditions are recorded in Davis Langdon’s quarterly Market Forecast (last published 1 February).


Price Adjustment Formulae indices, compiled by the Building Cost Information Service (previously by the Department for Business, Innovation and Skills), are designed for the calculation of increased costs on fluctuating or variation of price contracts. They provide useful 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 12 months between February 2012 and February 2013, the 60 building work categories recorded an average rise of 1.3%, reversing the downward trend that had characterised the previous 15 months.

The largest price increases over the last year have been in the following work categories:

Feb 2012-Feb 2013% change
Pipes and accessories: clay and concrete4.2
Cladding and covering: lead4.1
Linings and partitions: plasterboard3.9
Finishes: screeds3.6


And the largest fallers are:

Concrete: reinforcement-4.9
Windows and doors: aluminium-3.3
Pipes and accessories: aluminium-2.6
Cladding and covering: aluminium-2.4
Scaffolding materials-2.0
Windows and doors: steel-1.4
Pipes and accessories: spun and cast iron-1.2


Falls in prices have occurred in those work categories that have a high steel or aluminium content.

Steel prices declined steadily throughout 2012 but the beginning of 2013 has seen prices beginning to rise again. The decline in aluminium-based work categories reflects the decline in aluminium (and other metals) prices in the first half of last year.

Materials: Cheaper imported goods are balancing the rises in consumer inflation



  • Consumer prices remain stubbornly above target and are forecast to rise further in the short term ▲
  • Food and fuel prices have pushed industry input costs higher but have been balanced by cheaper imported goods ▲
  • Industry output price inflation below 1.5% since mid 2012 ▶
  • Metals prices have taken a recent dip ▼
  • Recent decline in the value of the pound will push up the price of imported construction materials ▲
  • Construction materials subdued throughout 2012 and ended year in decline ▼
  • Steel prices led the price decline in the second half of last year ▼

% change

Jan 12-Jan 13

Consumer prices index 


The annual rate of increase remained at 2.7% for the fourth consecutive month but the index fell 0.5% in January as sales prices for clothing and footwear took effect. Inflation is forecast to rise in the short term as the pound’s recent depreciation lifts import prices.

Industry input costs  
Materials and fuels purchased by manufacturing industry1.8
Materials and fuels purchased by manufacturing industry excluding food, beverages, tobacco and petroleum industries0.6


Industry output prices rose 0.2% in January but the annual rate of increase decreased slightly to 2.0% and the narrower index held steady at around 1.4%.

Metal prices

cash pricesFeb 12 average - 21 Feb 13 


Metals prices have generally been rising since last August but took a downward dip in mid-Feburary on concern over Chinese demand. Over the year lead prices have shown the largest increase with prices boosted by demand for batteries following Hurricane Sandy. Nickel prices have shown some recovery since the end of last year but price recovery lags other metals due to high inventories and anticipated market surplus.

Construction industry

Materials price increases for the construction industry over the last year (to December 2012) are detailed below:

 Dec 11 - Dec 12 
Construction materials generally  
New housing+0.7
Non-new housing work+0.3
Repair and maintenance+0.4


Construction materials prices in 2012 were generally subdued and ended the year in decline.

 Jan 12 - Jan 13 
Mechanical services materials  
Housing only-2.3
Electrical services materials0.5



Prices for housing mechanical services materials declined steadily throughout 2012; prices for non-housing work have shown little movement. Prices for electrical materials rose in the first part of 2012 following the movement of copper prices but fell back and have shown little change since. A few materials have shown above or below average price movement over the last year:

 Jan 12 - Jan 13 (provisional)
Particle boards6.7
Bricks and clay products5.7
Veneer sheets and wood-based panels5.0
Timber doors and windows-4.4
Metal sections-5.3
Steel for reinforcement-9.0

Labour: Weekly earnings have fallen, but new wage agreements have come into effect



  • Over the three months to December 2012, weekly earnings in construction averaged £543, 0.4% lower than the same period the year before
  • Average earnings throughout the whole economy rose by 1.4% over the period
  • Construction redundancies in the October-December 2012 quarter rose back to 22,000 after improved figures of 18,000 and 12,000 in the two previous quarters. However, the latest Markit/CIPS UK Construction PMI reported higher employment levels in January, the first time in four months.


New wage agreements came into effect at the beginning of 2013 for building and civil engineering operatives, heating and ventilating operatives, electricians and steelworkers.

Builders and civil engineering

Builders’ wage rates set under the Construction Industry Joint Council agreement were last revised in September 2011. A new agreement provided a 2% increase in basic pay rates from 7 January 2013, hourly rates becoming:

General operative£8,03
Craft rate£10.67


Heating and ventilating

A 2013-14 wage agreement was concluded just before Christmas. An increase in pension contributions and some allowances came into effect from 28 January 2013 and a 1.5% increase in wage rates and other allowances will take effect from 1 April 2013.


With the last revision to wage rates in January 2010, electricians have waited three years for a wage increase. From 7 January 2013 hourly rates rose by 1.5%. The principal rates for operatives with own transport became:

 National standard rateLondon rate
Electrician/site technician£16.40£18.37
Approved electrician£14.57£16.31


The agreement provides for a further 2% increase in basic rates from 6 January 2014.


The National Joint Council for the Engineering Construction Industry has agreed a three-year deal that provides annual reviews for operatives starting with a 2% wage increase from 7 January 2013.


The following table summarises the wage agreements currently in force for the principal wage fixing bodies within the construction industry


OperativesAgreement bodyCurrent basic hourly rateEffective sinceDetails inDate of next review
Builders and Civil
Engineering operatives
Construction Industry
Joint Council
Craft rate:
7 Jan 13See aboveNot before 2 January 2014
 Building and Allied Trades
Joint Industrial Council
£10.73/hour12 Sep 11Spon’s Architects’ and Builders’ Price Book 201317 June 2013 - rates will rise by 2-3%
PlumbersThe Joint Industry Board for Plumbing Mechanical Engineering Services in England and WalesAdvanced plumber: £13.50/hour2 Jan 12Spon’s Architects’ and Builders’ Price Book 2013 / Cost Update 27 May 20117 January 2013 - currently in discussions
 Scottish and Northern Ireland Joint Industry
Board for the Plumbing Industry
Advanced plumer £12.89/ hour6 Jun 11 Negotiations ongoing for 2013-14
H&V operativesJoint Conciliation Committee of the Heating, Ventilating and Domestic Engineering IndustryCraftsman:
4 Oct 10Spon’s Mechanical and Electrical Services Price Book 2013 / Cost Update 26 November 20101 April 2013 - rates will rise by 1.5%
ElectriciansThe Joint Industry Board for the Electrical Contracting Industry/Scottish Joint Industry
Board for the Electrical Contracting Industry
Approved electrician £14.57/hour (own transport)7 Jan 13See above6 Jan 14