Tender Price Index

» BCC's reaction

March 2015

2014 saw UK construction demand pick up for the first time since 2010. Its hardly surprising that tender prices increased as existing capacity and supply struggle to meet the demand in requirements. Wages for Bricklayers and Joiners were among the most notable increases. Current estimates put the tender price index to rise by 3.5 % 2015 and same again in 2016, however, government policy on spending, notably housing may reduce the rise.

Contractors may decide not to tender and restrict growth , decisions will be based on Clients reputations, securing resources and relationships will be big factors in the next two years , when the scars of the recession are still not fully healed.

Economic Growth can be felt in some sectors, however, new entrepreneurs will still find funding difficult in the next few years and they will be taking a bigger gamble, Seasoned operators will push to grow before the markets start top get the new blood in 2017, and capital purchases start to exceed values again.

2015 and 2016 are about companies re-structuring and positioning, however, fortune may favour the brave in 2015 & 2016.

BCC's Thoughts

With materials starting to regain lost ground on prices, for example steel having lost some 35% since 2008 has now increased in price regaining ground 20% generally, this has a large effect on many areas of the industry, ducting, large components etc. and the pound has not regained any substantial ground against the euro.

Our summary is that building material costs have continued to rise through the recession, however, the reduced cost of steel and a few others materials have generally held the overall construction material cost rise down. The financial climate and reduction in construction orders has forced tenders down from what could be considered the inflated costs of early 2008, tenders are still lower than 2008 but this is not any more than 10% due to the building material cost increases and we feel it is these building material cost increases that will pull the tender price index back upwards as contractor must allow for the material increases in their tenders.

New building control regulations such as Part L and the increased desire for sustainability together with conservation of fuel and power will mean that Quantity Surveyors will have to reach to new levels of understanding and research to enable Architects to have any budget left to deliver good design work. There will now be two tiers of QS practices that can advise on design costs as before or new practices that can seek out ways to enable bespoke ideas through to completion.

Greater savings can be achieved in selecting a contractor when work is thin, however, it is important to ensure the price is right, adequate for the project and there is a decent contingency to cover legitimate claims which will be forthcoming in the current climate.