Consultant says tender price inflation will be lower in coming years

The partial economic recovery expected in 2024 has not factored in the cancellation of the northern leg of HS2, according to Rider Levett Bucknall. 

In its latest construction market intelligence report, the consultant said the loss of heavy civil engineering work related to the scheme would “punch a hole” in workload projections for some major contractors and subcontractors. 

It added the plant-intensive nature of civils work means a “disproportionately lesser amount of labour” will be freed up to the remaining market, it added. 

hs2 plant

Source: HS2 Ltd

The plant-heavy nature of civils means the loss of work on HS2 won’t be matched by an equivalent flood of labour into the market, RLB said

RLB very slightly downgraded its tender price forecast for 2023 to 3.75% in its final prediction of the year. 

It projects tender price inflation to be lower in the coming years, coming in at 3.14% for 2024, 3.32% for 2025 and 3.17% for 2026, although it nudged up its forecasts from those put out in Q3. 

The consultant said a slowing pipeline of work for contractors would increase bidding competitiveness in the coming years. 

“The need for replacement workload will, in many cases, drive bidding motivations, even though input costs are set to match uplifts in prices for work,” the report said. 

Steel and timber prices have fallen by more than 20% in the year to October, although prices of general building materials remain high, with no real forecast of a fall in the coming year. 

According to RLB’s regional commentaries, the tailing-off of workload and the anticipation of only a partial recovery next year could lead to reduced volatility in input costs. 

Roger Hogg, chair of the global research committee, said: “Participants in the construction supply chain are facing rapidly changing circumstances as existing workloads complete and competition to win new orders intensifies.  

“Risk loadings remain clothed in uncertainty, not least because of the prospect of an upcoming general election, which makes maintaining a constant and balanced workload more important than ever.”