Tender prices increased 7.5% in the year to June compared with the same period last year, but the rate of increase will slow over the next 12 months, according to QS Davis Langdon & Everest.
Tender price inflation is expected to fall to 2.5% to 4.5% in the coming year, according to DL&E's Tender price forecast (pages 74-76). The report says rises would be driven by the climate change levy, aggregates tax and the continued shortage of skilled workers.

"Tender price inflation is expected to slow down to the government's retail prices inflation target or a little higher," it said. It added that inflation will range from 3-5% in the 12 months to June 2003.

Shortages of bricklayers, plasterers, carpenters and joiners are the highest they have been for 10 years, with more than 80% of firms reporting difficulties in recruiting staff. Bricklayers are paid up to £120 per day in London and the South-east.

The report also found that construction activity grew for the 29th consecutive month in June despite the widely predicted slowdown.

The fall in commercial work was becoming increasingly apparent as tenant confidence and interest in letting space waned as a result of uncertainty over the economy. This was true despite a shortage of office space in most regional centres.