Covid sending numbers into negative territory

A sluggish recovery from the covid-19 crisis is edging tender prices across the UK closer to deflation, Arcadis has warned.

The consultant has downgraded its tender price forecast for 2020 to -4% in London and -3% in the regions in its latest quarterly analysis of the UK construction market.

covid-19 site TfL

Social distancing rules on sites are hitting productivity levels

Increased costs due to social distancing rules, delayed project starts and completions and a lingering risk of disruption from further covid-19 outbreaks is threatening to sap the strength of the industry, the report warned.

But it said onsite productivity is recovering better than expected, with most sites now up to 70% of pre-covid levels.

Combined with expected further disruption from Brexit, including changes to the labour market, the report predicted that contractors and their supply chains will continue to be risk averse when it comes to projects, with a focus on quality rather than work at any cost.

Arcadis head of strategic research Simon Rawlinson said the recovery would be helped by short-term actions, including longer site-operating hours, extending planning consents and prompt payments.

But he added: “Clients are reconsidering their business needs, with risks around lower productivity, future covid-19 disruption to works, and supply chain resilience all having the potential to cause delays and increases in costs.”

But in the longer term the report took a bullish view, forecasting a tender price inflation of 5% by 2024/5.

Combined with longer term initiatives such as recruiting more apprentices, adopting new tech and exploring collaborative business models, Rawlinson said the industry could emerge from the crisis stronger.