Clients warned of fresh wave of contractor failures

Aaron Morby 12 years ago
Share

Cost consultants E C Harris has warned record material prices will trigger a further damaging round of contractors going to the wall.

In the firm’s latest tender forecast, QSs predict the painful period of tender prices falls is over. But cost analysts have warned that prolonged cut-throat bidding is set to have catastrophic consequences for contractors and their suppliers.

Record prices are being paid on world markets for copper, energy prices are up 15% and reinforcement and structural steel prices are up by 12% and 10.5% respectively.

Paul Moore, head of cost research at EC Harris said: “Although we are now expecting tender prices to rise this year, the recovery of the industry is far from certain and could be delayed for a couple of quarters.

“Contractors’ opportunities to increase their tender prices are likely to remain limited and even when workload picks up the worry is the delivery of those low tender priced schemes.”

“Where contractors have pressurised their sub-contractors and cut their profit margins to the bone to secure workload, rapid increases in costs could mean that contractors find themselves caught out with limited options to recoup their losses.

He added: “Previous recessions indicate that the most dangerous time for insolvencies is when workload picks up.

“That brings with it the pressure of increased costs which can be enough to drive contractors on fixed price contracts into failure.”

The latest E  C Harris quarterly report predicts that prices will turn the corner in the second quarter, but tender prices are expected to edge up by just 0.2% by the fourth quarter of the year.

London tender prices are believed to have already bottomed out. They are forecast to grow by 1.7% to the end of 2011 as a result of a rise in orders particularly in the commercial office sector.

Infrastructure tender prices, on the other hand, have not been impacted by a fall in workload, but rather due to lower wages and increased competition.

Following the UK Government’s Autumn Review there is likely to be a shift in focus towards the rail and renewable sectors for long term revenue.

The EC Harris report predicts infrastructure tender prices will bottom out in the first quarter of 2011 and then pick up to show an annual increase of 2.1% by the end of 2011.

Latest news

Administrator details confirmed at Southampton M&E firm

Begbies Traynor now in charge at Working Environments as suppliers face large losses
7 hours ago

Applicant numbers nosedive for construction vacancies

Recruitment market gets even more competitive - how the Enquirer can help
11 hours ago

Housing association shuts in-house modular factories

Swan closes loss-making steel frame and cross-laminate timber factories
13 hours ago

350-homes approved around iconic London Tube station

Housing blocks to be built around Grade II-listed Hounslow West Tube station
13 hours ago

Domis set for £195m Boddingtons Brewery scheme

Developer Salboy buys Manchester site to kickstart long-awaited 556 homes project
15 hours ago

John Lewis £500m funding deal to build 1,000 rental homes

Deal to advance BTR flats at store sites in Bromley, West Ealing and Reading
1 day ago

Esh launches new housing retrofit division

Esh Retrofit Solutions will target market to improve the energy performance of social rented homes
15 hours ago

Eric Wright wins tricky £52m Liverpool transformation

Contractor working with engineers at Ridge and Partners on "challenging" Stanley Lock Flight site
3 days ago

Investment giant buys Bristol M&E contractor

RDCP Infrastructure acquires Avon Combined Electrical Services
4 days ago

Demolition start for £50m Farnworth town centre rebuild

Caddick Construction is tipped for main works due to start in the spring
4 days ago

L&G Modular strikes deal to build 1,000 affordable homes

Modular homes business teams up with Hampshire's Vivid housing association
4 days ago

Former Erith operations director joins John F Hunt

Scott Exell named new operations director at demolition specialist John F Hunt
4 days ago

Green light for £135m Leeds twin tower resi scheme

Construction to start in New Year on 500 build-to-rent apartments
4 days ago

Mace hits 1m tonnes carbon saving target for clients

Present work pipeline betters 2026 carbon emission saving target
4 days ago

Plans in for £40m surf park at former Kent colliery

Seahive surf lagoon and health resort will be built near Deal
5 days ago

Crushed demolition worker vows to return to industry

Shannon Brasier hoping to return to construction following horror accident
5 days ago

Mount Anvil to start 900-home North London estate rebuild

Planning approval paves way for Barnsbury Estate rebuild in Islington
5 days ago

Green light for major laboratory campus in Cambridge

Developer BioMed to tender first building on 600,000 sq ft lab complex in the New Year
5 days ago

Belfast firm signs the biggest work deal yet under Project Gigabit

Fibrus to hook-up rural Cumbria to lightning-fast broadband under £108m deal
5 days ago

McLaren wins Leeds logistics park contract

Work to start imminently on warehouse complex for Firethorn Trust
5 days ago

Work restarts on £683m waste power plant after site death

Construction suspended for a week of investigations following fatality
5 days ago

Demolition starts on £135m Wigan Galleries scheme

Contractor BCEGI starts work on project to redevelop Wigan town centre
6 days ago

Amey CEO to step down following private equity buyout

Amanda Fisher to leave once business is transferred to new owners
6 days ago

New body set up to vet plant operator card schemes

Contractor trades bodies unite to tackle competency concerns over plant operator skills cards
6 days ago

Kier leads switch to hybrid battery generators

Battery units work alongside smaller generators cutting run times by nearly 60%
6 days ago

Plans in for first Leeds co-living scheme

Watkin Jones submits plan to convert old Direct Line HQ into 230 studio flats
6 days ago

Demolition worker crushed by excavator

Court hears 20-year-old woman was left with "life changing injuries"
6 days ago

Government pays £700m for 50% stake in Sizewell C

New body, Great British Nuclear, will be set up to develop pipeline of nuclear projects
6 days ago

Costain wins Heathrow Airport asset renewal deal

Firm takes early contractor involvement role in Terminal 2 baggage handling upgrade
7 days ago

Worker killed on £683m waste power plant site

Fatal collision involving heavy goods vehicle on giant north London site
7 days ago

Contractor services