Consultant says concerns emerging about replacement of workload
Volatility in the prices of fuel, energy and materials is causing difficulties for procurement, according to Rider Levett Bucknall’s latest UK tender price forecast.
Construction markets across the country are continuing to operate at a high level relative to capacity, according to the consultant, but clients are increasingly averse to taking unnecessary risks.
RLB forecast a spread of possible tender price uplifts from 2022 to 2025, with the next two years displaying wide spreads, indicating a significant degree of market volatility.
The tender price uplift predictions for 2022 range from 5.3% to 8.17%, with the most likely scenario forecast as 6.54%.
According to RLB, this is set to drop to a most likely scenario of a 3.8% rise in 2023 and a jump of 3.06% in 2024, before rising again slightly in 2025.
Northern cities will have experienced the highest rises across 2022, according to the report, with the most likely scenario for Sheffield, Leeds, Manchester and Liverpool set at 8.5% – above London, Bristol, Cardiff and Birmingham.
The report said clients were favouring an open-book route, “where tendered sub-contract prices can be established and visible”, but that main contractors and their supply chains were still unable and unwilling to fix prices for any length of time beyond the immediate short-term.
While output remains high, margins have been squeezed as building cost inflation, put at 9.7% by the Building Cost Information Service, outstrips average tender price inflation of 7.8%.
On top of this, the report said there were “concerns in some regions as to the replacement of workload as projects reach completion”.
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