Limited number of firms bidding jobs above £200m sending costs north, QS warns

Core Five has said the number of firms able to carry out work on major building schemes is limited which is making these projects comparably more expensive than smaller jobs.

In its latest market update for Q2 this year, the London cost consultant said the number of main contractors and subcontractors willing to carry out schemes worth £200m and above was much smaller than jobs below this amount.

It added: “This potentially impacts procurement routes, cost fixity levels and contract T&Cs and requires careful management. A flexible approach is needed, particularly around considering alternative firms and different supply chains.”

crane

Source: Shutterstock

The pool of main contractors able to work on major projects is limited and is pushing up costs, Core Five’s report said

The firm said tender price inflation for major projects would be 1.5% this year, compared to 1% for mainstream jobs.

And it said price rises for major jobs next year and in 2026 would be 4%, outstripping the 3.5% predicted for mainstream projects.

In its report, the firm, which is the QS on the £400m 50 Fenchurch Street tower in the City set to be awarded to Multiplex later this month, said reduced construction demand had “created a relatively competitive pricing environment, outside of certain restricted sub-markets”.

But it warned: “At some point this will change, potentially when interest rates start to drop and more substantive inflation is likely to return.

“It is likely that more substantial demand will return in some fashion, potentially triggered by a reduction in interest rates. We therefore expect inflation to return to at or above the long-term average levels in 2025 and 2026. There is the potential for certain restricted hot markets to exceed this. The message is simple – buy now if you can.”

Topics