This analysis of building costs shows materials prices falling slightly but labour rates rising markedly. Drylining prices and electricians' rates are also highlighted in this quarter's report.
Hot rates: drylining

This quarter's edition looks at drylining prices around the country.

The rates are associated with medium-sized building projects in the £1-4m range. The rates relate to Standard Method of Measurement of Building Works items and are representative of schemes with straightforward access. They are averages from successful competitively bid tenders received over the past three months. Rates can vary considerably within regions and between projects.

Materials prices

The rate of increase in the output price of manufactured products has continued to fall. As a result, the output price index shows no change over the 12 months to December 1998. This is the lowest year-on-year change for 39 years.

The output price index for products excluding the food, beverages, petroleum and tobacco industries fell 0.6% over the past 12 months.

Output prices in both indices have declined further over the past six months. Manufacturers continue to benefit from lower input costs. Crude oil prices plunged 44% during 1998 and imported metal prices fell 13% over the year.

Construction materials prices rose 0.3% over the year to December 1998, but in the last six months of the year, fell 0.6%. Electrical machinery and apparatus prices fell 2.1% over the second half of the year.

Despite these negative statistics, many construction materials suppliers introduced revised price lists at the beginning of 1999. It remains to be seen whether contractors are forced to pay the extra costs or are able to negotiate increased discounts.

Building costs and tender prices

DL&E reported on the latest tender price and building and mechanical and electrical cost trends in Tender price forecast (22 January).

Price adjustment formulae for construction contracts

Price adjustment formulae indices enable the calculation of increased costs on fluctuating or variation-of-price contracts. They also provide useful guidance on cost changes in trades and industry sectors. Indices are published monthly by the Stationery Office in Price Adjustment Formulae for Construction Contracts: Monthly Bulletin of Indices.

The indices give useful guidance on the differential movement of work sections in Spon's Price Books. Most of the work category indices have changed by less than +/-1% over the past six months. However, 27 of the 60 work categories have shown small reductions.

Many of the items are related to metalwork, as a large number of metal commodities have been on a long-term downward cost trend. This is largely because of the strength of the pound over the past two years. The price of imported zinc has fallen 40% since September 1997, aluminium has fallen 17% since January 1998, and copper has fallen 32% since June 1997.

Similarly, the price of UK-produced, hot-rolled steel bars and rods has fallen 12% since August 1997, and cold-drawn products have reduced 3% since May 1998. Over the past six months, only 15 work categories have shown cost increases. Most relate to plumbing operations and reflect the 5% wage increase awarded to plumbers in August 1998.



In March 1998, the Joint Industry Board for the Electrical Contracting Industry promulgated a two-stage industrial determination that reviewed wages, allowances, working hours and benefits schemes.

The first part of the determination came into effect on 30 March 1998, increasing wages 5.2%. The second part came into effect on 4 January 1999, raising rates 4.8%.