Firm says some firms could cut prices ‘by more than is achievable to secure work’

Mace has told clients not to take the cheapest price on jobs – or run the risk of schemes being mired in problems from firms on the financial brink.

In its latest market report, covering the first quarter of this year, the consultant said pipelines drying up might tempt some of the supply chain to bid jobs at rock bottom prices to bring in turnover.

But the firm said falling materials and staff costs could prompt some to send in bids that are unsustainable.

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Mace’s consulting business has said firms will be tempted to drop their prices on jobs to fill dwindling order books

Andy Beard, the firm’s global head of cost management, said: “Over the past quarter, material prices have continued to drop and there are now signs that labour costs are starting to fall. While this is good news, developers need to be careful of those who are aggressively cutting bid prices.

“Weakening pipelines are likely to encourage some firms to squeeze prices by more than is achievable to secure work.

“Supply chains are still fragile, and work won at ultra-low prices won’t help to repair them. As a sector we should work together to ensure all of those we work with are able to remain in business, as more insolvencies will only reduce competition for supplies, potentially driving construction costs upward once more.”

And he warned: “Suppliers are also facing problems from high credit costs, meaning that paying on time is vital in order to keep some afloat.”

Mace said tender price rises would stay at 2.5% nationally and 2% in London, rising to 3% nationally and 2.5% in London next year.