Firm said surveyed contractors were reporting reduced order books towards the end of 2017

Construction site

A cooling market and softening construction demand towards the end of 2017 has seen Turner & Towsend revise its tender price growth expectations down for the year.

In its latest market update, the firm said it now expected tender price inflation for buildings to be 1.4%, down 0.8 percentage points since its July forecast, and infrastructure tender price growth to be 0.1 percentage points lower at 3.6% for 2018.

Contractors surveyed by T&T revealed reduced order books with nearly 30% reporting a cooling market, which the consultant said indicates reducing industry confidence as the impact of Brexit remains unclear.

And the uncertainty of the UK’s exit from the European Union is hitting pipelines, with cashflow being limited as investors hesitate to bring projects forward, T&T added.

This has in turn caused an increase in competition with contractors adopting “predatory” pricing strategies and a downward revision of tender price expectations by the industry.

An increasing proportion of contractors are predicting forecasting that growth could be between 0.0-1.0% and margins are being tightened in an effort to win jobs – in the third quarter of 2017 the average margin among UK tier one contractors was 3.1%.

T&T said this heightens the risk of more contractors going bust and will also render some projects unviable.

But it added tier-two contractors are continuing to charge a premium for specialist work with a national margin average hitting 6.6%.