Tender prices are expected to rise from mid-2013 as contractors’ margins tighten and they become unable to continue to absorb higher input costs, figures from the Building Cost Information Service (BCIS) reveal.
The BCIS’s Tender Price Index said tender prices fell by 1.3% in Q3 2012, compared to the previous quarter, and forecast a downward trend on prices for the remainder of 2012 and the first part of 2013.
But with input costs, which include items such as material and energy costs, having risen by 7% since 2010, contractors’ margins are thought to be severely limited, with little downward manoeuvrability, forcing a rise in tender prices from the middle of the year.
Peter Rumble, BCIS information services manager, said: “The construction sector is continuing to struggle through difficult times with yet another dip in tender prices further tightening contractor margins. However, as contractors can no longer absorb costs, we anticipate this trend to begin reversing in mid-2013 and continue rising until the end of BCIS’ forecast period in 2017.”
The news comes as a survey of 900 construction firms by pre-qualification service Constructionline, two thirds of which had a turnover of £2m or less, found that almost three quarters (71%) had experienced an increased or level workload over the last three months of 2012, compared to the previous three months. And 85% of firms said they expected workloads to increase or stay the same between January and April 2013.
Meanwhile, almost a quarter (23%) of the firms surveyed said they had had work cancelled in the last six months, compared to nearly 59% six months ago, when the last supplier survey took place.
Bernard Keogh, managing director of SME Arque Construction, told CM: “There’s a good level of work to tender for, and we are reasonably positive about the next three months of 2013, although our workload will not be up on the same time last year … We have been experiencing more postponements than cancellations, it tends to take longer to secure jobs after tenders are submitted, as clients tend to think much harder before placing an order.”
The Constructionline survey revealed that 55% of respondents saw the length of time it takes to complete pre-qualification questionnaires as the biggest challenge when tendering for work, while 51% of respondents blamed competition from larger firms and 19% “unreasonable” client demands.
Meanwhile RIBA workload surveys revealed that architects reported workloads rising for the third successive month in a row.
