Capacity fears grow as industry boom continues

The construction industry is enjoying one of its busiest periods of the past 20 years, according to research by cost consultant Davis Langdon.

The report, written exclusively for Building, will exacerbate fears that UK contractors will choose not to bid for Olympics work when it comes to the market.

According to Davis Langdon, tender prices have risen in London by 8% over the past year, the biggest increase since 2000. The rise was steepest in the first quarter of 2007, at 2.5%.

The value of orders for London buildings has risen 45% in the past year, driven by a soaring demand for offices in the capital. Davis Langdon said it expected London construction prices to increase 6-8% in the next year.

The report also reveals that new-build output has risen 5% in the past year, the second highest figure since 1988. Output was up 18% in north-east England, a figure only matched by London.

Material price inflation is also running at high levels, with increases of 10% last year. Davis Langdon said it expected inflation to remain high this year owing to increases in metal prices.

The trend has emerged the week after Building reported that the Olympic Development Authority (ODA) was so worried that UK firms were not interested in building venues for the Games that it was directly approaching them to ask them to.

Balfour Beatty has bid for the construction of the velopark, and Building can reveal that it is intending to submit a bid for the media centre in a consortium led by developer Babcock and Brown. However, the ODA had to persuade the company to bid.

The ODA has also approached other contractors, including HBG.