Clients warn summer will be toughest period and study says tender prices will fall 10% in 2009

A panel of the UK’s biggest clients has cited June as the “crunch month” – the point at which the economic crisis will reach its toughest point for the industry so far.

In a report published this week they also warn that the summer period could spell the end of the collaborative working proposed by the 1998 Egan report.

The Equal Partners report was based on the views of 30 clients including British Land, BAA, Land Securities, Hammerson and Stanhope. It predicts that under pressure from the dire economic situation, relationships between clients and their supply chains will either become more collaborative or revert to being more combative and price-focused. It says market conditions in June, when many projects near completion and there are no new ones to start, will dictate in which direction most relationships go.

The news comes as steep falls in construction output and tender prices are predicted for 2009.

David Jennings, managing director of Business Vantage which published the survey, said the need to save money could mean clients prioritise low costs. He said: “The industry is in grave danger of throwing away all the good work of the past 15 years.”

An action plan has been devised by Business Vantage and the Construction Clients’ Group (CCG) urging clients to ensure they engage early with suppliers and monitor supply chain partners to ensure they forge strong, long-term relationships.

The industry is in grave danger of throwing away all the good work of the past 15 years

David Jennings, Business Vantage

The work comes as research from QS Rider Levett Bucknall showed UK tender prices would contract by up to 10% next year.

The report said the weak pound would mean UK firms will struggle to take advantage of the global fall in materials prices, and that tender prices in London would fall by 2.5%-5% in 2009 and up to 2% in 2010.

This echoes the BCIS’ view that tender prices would fall by 7% this year and 3% next (see below).

Research conducted for Building found that 68% of firms in the residential sector had less than three months’ advance work secured, a sharp increase from 48% three months ago.

Tender prices had fallen to record lows in a number of sectors, with half of firms reporting insufficient demand.