Building tender prices could fall 10% in 2009, according to the latest economic forecast from EC Harris.
The report comes as the RICS’ tender price index for the second quarter of 2008 showed that contractors have been forced to hold prices in order to secure tenders in the face of rapidly declining demand.
Despite rising costs, the index found that the price of new construction work in the second quarter of 2008 had remained the same as the previous quarter, which had already seen a fall. New orders fell 20% compared with the same quarter last year.
EC Harris said falls in commercial and housing activity, and stricter rules on lending, were to blame for the drop in tender prices. It said the mean decrease over the next year is expected to be about 5%.
Paul Moore, head of cost research at EC Harris, warned that margins would be cut as the industry realised the full impact of the “volatile and unpredictable” marketplace.
He added that special care should be taken in choosing companies. “A falling market brings additional risks which call for greater caution,” he said.