War in Ukraine forces dramatic revision of predicted costs

Rising energy prices has seen Turner & Townsend revise upwards building tender price inflation by nearly double its prediction from just three months ago.

Its spring forecasts for tender price rises in 2022 now sit at 8.5% for real estate and 6% for infrastructure – much higher than its winter 2021/22 predictions of 4.5% and 4%.

The firm said soaring energy prices, stemming from the ongoing war in Ukraine, were at the heart of the spike, with indices for crude oil, diesel and premium unleaded increasing by 99.4%, 33.8% and 30.5% month-on-year in March alone.


Source: Shutterstock

Energy prices have catapulted in the wake of the war in Ukraine

These price hikes have impacted logistics costs as well as energy-intensive manufacture processes.

T&T said inflated rates will continue through the remainder of this year before settling, with long-term tender prices forecast for 2025 at 4% in real estate and 5% for infrastructure.

It added firms must “get the basics right” in the face of these pressures, factoring in time for early engagement with suppliers and ensuring risk is well understood.

It also raised concerns that inflation might undermine work to achieve net zero, warning of a tipping point at which early-stage projects are put on ice and clients postpone capital investment decisions.

Martin Sudweeks, the firm’s UK managing director for cost, said it was time for “calm, clear and programmatic thinking”.

He said contract scrutiny needed to be “front and centre” and urged businesses to avoid “panicked procurement in the hope of locking-in pricing”.

“This is about picking the best team and ensuring you have capable and resilient contracting partners,” he added.

“Clients should map out the supply chain and identify weak links, then work to eliminate risk and where necessary share the burden of disruption.”