RICS tender price survey finds signs of recovery, but warns of long road ahead


Construction tender prices are beginning to bottom out, but the industry has a long way to go before it recovers to pre-recession levels, the latest tender price survey by the RICS has concluded.

The RICS’ UK construction tender price index found tender prices rose by 6.4% in the final quarter of 2013, compared with the previous quarter, and by 4% compared with the same period in 2011.

The RICS said this rise in tender prices was thought to be a “blip”, but that the fluctuation in prices evident over the preceding quarters was indicative of a bottoming out in the market.

The RICS said the market is caught between rising input cost pressures, both current and future, and the downward pull of construction workload.

Peter Rumble, BCIS information services manager, said: “Whilst it looks as though tender prices are bottoming out, the construction industry still has a long way to go before we reach pre-recession levels.

“With new work output expected to fall again in 2013, we are predicting a rise in tender prices a little ahead of input cost rises over the next year.

“As demand begins to pick up again in 2014 tender prices will still remain a little ahead of cost rises and gradually move further ahead towards the end of the forecast period in 2017, as demand strengthens.”

Key findings of RICS survey:

Building costs

Building costs remained unchanged in Q4 2012 compared with Q3 2012, but rose marginally by 0.3% compared to a year earlier, the RICS said. Materials prices also remained unchanged in Q4 2012 compared with both the previous quarter and a year earlier.

For the construction sector as a whole, average weekly earnings (AWE) remained unchanged in Q4 2012 compared to a year earlier, this compared unfavourably with AWE across the economy as a whole which saw a 1.4% growth, the RICS said.

Construction orders

The report found that the total volume of construction orders increased by 3% in Q4 2012, compared with the previous quarter and by 11% compared with the same quarter in 2011.

It said all sectors saw an increase in orders of between 9 and 10%, apart from the infrastructure sector where orders fell by 15% in Q4 2012 compared with the previous quarter.

It also found that new orders increased significantly compared to the same quarter the previous year, with double digit increases across all sectors, with the exception of the infrastructure where new orders fell by 13%.

However, overall total construction orders remained unchanged in 2012 compared with 2011.

Construction output

It also found that total construction work output for Q4 2012 rose by 1% compared to Q3 2012, but fell by 9% compared with a year earlier. New work output rose by 2% in Q4 2012 compared with the previous quarter, but fell by 11% compared to a year earlier.

All new work sectors experienced a fall in output over the year to 4th quarter 2012 , with the exception of the private industrial sector where output increased by 6%.

Double digit falls occurred in the public housing, public non-housing and private commercial sectors with falls of 14%, 19% and 15% respectively. Total construction output fell by 8% in 2012 compared with 2011, while new work output fell by 11%.