Mace Cost Consultancy predicts weaker inflation growth and economy for next three years
Mace Cost Consultancy has warned that global market risks are putting future work pipelines in doubt, in its first quarter tender cost update for 2016.
The firm added that a weakening economic picture will effect investment in the longer term, but expects growth to continue for the next three years - albeit at a slower pace than 2015.
Mace has maintained its UK tender cost inflation forecast of 4% for 2016 and 2017, but expects inflation to drop to 3.5% in 2018.
Mace Cost Consultancy managing director Chris Goldthorpe said the firm is “seeing some public sector projects starting to become more competitive, and there are early signs of the market softening with some contractors now more prepared to consider single stage tendering.”
However, he added that many contractors and supply chains are still busy with lengthy order books and that there has been a ripple effect from London out to the regions.
London, Mace predicts will see the same tender cost inflation rises as the UK overall and expects to see a consistent level of inflation in most regions over the next two years on the back of lively construction activity spreading out from the capital.
The firm also predicts that continued growth will lead to further pressure on skills and earnings, which are likely to become higher during the year.