Consultant Davies Langdon warns of continued uncertainty about the extent of the UK economic crisis

Despite nine months of economic uncertainty, construction prices continued to rise in the first quarter of 2008 by 1%. However, the rate of growth is slowing down with new orders in decline since the middle of 2007, according to a market forecast compiled by consultant Davis Langdon.

Peter Fordham of Davis Langdon and author of the report

Peter Fordham, author of the report, said: “Despite a 1% rise in tenders since beginning of 2008, there is evidence of an accelerated slowdown and continued uncertainty about the extent of the UK economic crisis.”

The private housing and commercial sectors are feeling the credit crunch most, with housing orders falling away sharply.

Halifax reported an average fall of 2.5% in house prices in March and housebuilders have been restricting development in response to this trend.

Whilst large commercial projects in the pipeline will sustain short term growth, with London relatively buoyant, the number of new orders for private commercial work in the last quarter of 2007 fell to the lowest quarterly level since the end of 2005.

Although few projects are being cancelled, developers appear to be ‘reviewing’ projects and prelets and advanced sales are becoming a requirement from funders.

The construction industry is likely to turn to the public sector with public capital expenditure already committed on schools, social housing and the Olympics.

Whilst tender prices continued to increase in Greater London during the first quarter of 2008, the rate of increase appears to have slowed down. At the same time, the building cost index rose by 4.3% over the previous year – the lowest in 4 years.