The credit crunch will not hit building tender prices for another three years, according to EC Harris.
In its latest economic survey, the consultant says full order books mean contractors will ride out the storm in the financial market until at least 2011.
Paul Moore, head of cost research at EC Harris, said: “A good number of major schemes have secured funding and, with many contractors having full order books for the next two to three years, tenders are set to plough ahead.”
UK tender prices are forecast to rise 4.8% in 2008 and 4.7% in 2009. In London, EC Harris says the Olympic effect will push prices up 6.5% to the end of 2011 (see graph).
Moore said: “Most Olympic building work will have finished by 2011, but Crossrail could buoy prices in London beyond that.”
As a result of the heavy workload in the capital, the report said the tendering market can sometimes seem “impossible”. “With contractors picking and choosing the schemes they bid for, and with only so much capacity in the market, competitive tenders are still proving difficult to procure.”
Labour, materials and subcontractor availability will remain a problem
Paul Moore, EC Harris
Moore said: “Availability of labour, materials and subcontractors will remain a problem in London over the next few years. Sudden and unexpected price spikes are likely for different trades at different times.”
He warned that the delivery of jobs could also be a problem across the UK. “Contractors are having difficulties sourcing subcontractors to deliver key items such as cladding and M&E services.”
The report predicts that longer-term schemes could suffer as a result of the financial squeeze. Moore said: “The cost and availability of funding to financial institutions has tightened, leading to speculative developments being reassessed. The private commercial market could be affected through to the spring and early summer of 2008 when it is thought that the exposure of funders should be resolved.”
EC Harris’ bullish assessment comes despite the fact that recent high-profile schemes have been delayed, including Stanhope’s Walbrook Square scheme and the Shard, both in London.
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