Consultant Turner & Townsend has revised its inflation forecast for real estate tender prices upwards to 5.5% in 2021.
The four-percentage-point change from 1.5% to 5.5% is Turner & Townsend’s largest upward revision on record, which it blamed on the volatility of raw material and labour costs and stresses on the supply chain.
It warned that some projects could experience inflation of up to 10%.
When it came to infrastructure tender prices, it predicted a one percentage point uplift to its 2021 forecast, from 2% to 3%.
It said the relative weakness of prices last year during the covid-19 pandemic made the current period of rapid price rises look more dramatic in relative terms.
But it warned that the current growth in tender price inflation is unlikely to reverse rapidly. In its autumn 2021 UK market intelligence report, entitled Weathering the inflationary storm, Turner & Townsend said: “Eventually supply chains will revert. However, market constraints persist in the short term and they are amplifying inflationary heat, which may be felt for a while longer.
“The most likely scenario is for a medium-term period of higher tender price inflation, rather than a short-term spike. As a result, inflation may put the brakes on a full recovery rather than undermine it.”
