Tender prices expected to rise significantly faster than general inflation

The price of new construction work rose ahead of general inflation in the year to the second quarter of 2007, according to the latest tender price index compiled by the Building Cost Information Service (BCIS).

New work output rose by 5.9% in the first half of 2007, compared with the same period in 2006, and is forecast to rise significantly above trend in 2007. The report says it is likely that tender prices will continue to rise in the third quarter of 2007.

The BCIS report also found that in the second quarter of this year, orders and enquiries rose and contractors were expecting workload to increase next quarter.

Peter Rumble, information services manager at BICS, said: “Tender prices are expected to rise significantly faster than general inflation over each year of the forecast period, mainly owing to above trend new work output growth over the next three years and upward pressure from increased input costs."

Growth in new work output is expected to rise significantly faster than its long-term annual rate in 2007, 2008 and 2009.

The private commercial sector is likely to be the main contributor to growth throughout venue work.

Andrew Thompson, BCIS managing director, said: “The current credit crunch may put a squeeze on private sector investment plans, but it is too early to tell yet.”