Contractors will be hit by higher materials costs and departing EU workers, report says
Mace has said a no-deal Brexit would “significantly damage the construction industry” as tender prices would be dragged down by a slump in demand.
In its latest report about tender costs, the firm reasserted its prediction that UK tender costs would rise by 1.5% in 2019 and 2020 and by 2.5% in 2021.
But it warned of “the rising likelihood of a no-deal [Brexit],” saying that a downward revision was likely if the UK left the EU without an agreement on 31 October.
Mace said the construction industry would be damaged by large drops in house prices and commercial real estate, which would result in a “sizable reduction in investment”.
The firm said contractors would also be stung by higher materials and labour costs.
A further depreciation in the pound and the introduction of tariff and non-tariff barriers would both push material costs higher, it added.
And it said a weaker pound would make the UK less attractive to overseas workers, which could “drive earnings higher and exacerbate skills shortages”.
Steve Mason, managing director of Mace’s cost consultancy arm, said: “While there is a growing appetite to secure workload for 2020, for now tender prices remain steady as the downside risks continue to be offset by strong input costs.”
But he warned: “The likely impact of a no-deal Brexit will put more pressure on the supply chain. As the combination of potential reduced demand with further increases in material and labour costs will inevitably affect margins, tender prices will feel a downward pressure.”
Mace chief executive Mark Reynolds has previously warned that firms cannot stockpile all the products or materials needed for their work.