Firm says tender prices could keep falling until first quarter of 2022
Clients need to keep tabs on all parts of the supply chain as the industry focuses on getting back to work, according to Turner & Townsend.
The consultant’s most recent UK Market Intelligence Report warns clients to be aware of potential supplier insolvency, material shortages and contract liabilities as the industry prepares for an easing of lockdown restrictions more details of which are expected to be announced by Boris Johnson later this week.
Through analysis of past recessionary data alongside the most recent forecast from the Office for Budget Responsibility (OBR), Turner & Townsend said tender prices could fall through to 2022 Q1 before rising after that.
But the report warned against assuming a firm forecast, pointing to the supply-led nature of the current covid-19 crisis being different to the demand-led nature of previous recessions.
Paul Connolly, UK managing director of cost management at Turner & Townsend, said much will depend on wider market confidence.
He added: “While OBR reporting points to a severe downturn as one scenario, robust demand going into the pandemic and government backing for key projects could act as a catalyst for parts of the sector to recover.
“What is clear is that clients need to support supply chains and assess where vulnerabilities lie, allowing for project plans to adapt and advance under a ‘new normal’ environment.”
T&T said despite falling demand caused by the pandemic and Brexit uncertainty further paring back investment, there was potential for inflationary pressures to counterbalance deflation.
Demand may not reduce across all sectors of the construction industry, with infrastructure, defence, health, life sciences and logistics all expected to show strong growth.