Margins squeezed as firms fight for work, RLB forecast warns

Rider Levett Bucknall’s latest tender price forecast has fallen to 3.75%, down from 4% in the last quarter.

The consultant said in its update for Q4 that margins were being squeezed by high input costs, a pipeline gap and economic uncertainty.

“Participants in the construction supply chain are facing rapidly changing circumstances as existing workloads complete and competition to win new orders intensifies,” Roger Hogg, the chair of the firm’s global research committee, said.

“Risk loadings remain clothed in uncertainty, not least because of the prospect of an upcoming general election, which makes maintaining a constant and balanced workload more important than ever.”

Despite the cost of steel and timber falling in 2023, RLB does not expect prices to drop further over the next 12 months.

It added the prices of general building materials remain high and aren’t expected to go down next year.

Labour costs are also expected to stay high following “significant” increases this year with the expectation they will go up further in 2024.

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The interim findings of Building magazine’s Building the Future Commission published in September found that ”a fragile recovering economy after the pandemic coupled with inflationary pressures has squeezed budgets on projects and hit companies’ profit margins.”

It said this has had a knock-on effect on investment in digital technology and other innovative techniques.