Clients warned of fresh wave of contractor failures

Aaron Morby 13 years ago

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

Lonsdale went down owing £65m to supply chain

More than 600 firms owed money as reduced credit rating sinks M&E giant
3 days ago

Wates only bidder for £80m Cardiff estate rebuild

Council contacted 20 framework firms but received only one bid for 295-home Channel View estate rebuild
3 days ago

£21m legal battle over flawed concrete at Salford flats job

Developer in compensation battle with Arcadis after new concrete core demolished
3 days ago

Abu Dhabi developer Aldar Properties buys London Square

UAE giant swoops on resi specialist in vote of confidence for London market
3 days ago

Hunt for delivery partner to revive New Hospital Programme

Programme delivery partner to get £600m fee to get plans back on track
4 days ago

Green light for new £780m Essex garden village

3,700 homes and four new schools to be built at Dunton Hills
4 days ago

Laing O’Rourke makes a £288m loss

Rampant inflation on fixed-price jobs and problem contracts blow hole in accounts
4 days ago

Keltbray, OCU and Clancy clinch £1bn electricity network upgrade

Scottish and Southern Electricity Networks awards biggest ever deals for central southern England
5 days ago

G&T enlisted for commercial review of HS2 main civils contracts

Phase 1 Main Works Civils Contracts to come under cost scrutiny
4 days ago

TClarke order books doubles to top £1bn for first time

M&E specialist on track to exceed £500m turnover this year
4 days ago

Wates signs Government safety remediation pact

Private builder belatedly signs fire safety developer remediation contract
4 days ago

Liverpool all-electric industrial park approved

McLaren and Caddick in chase for Sefton 800,000 sq ft Atlantic Park scheme
4 days ago

Former Buckingham Group MD to join John F Hunt

Simon Hyams is new Managing Director for Contracting
5 days ago

Three in race for retendered £150m A9 dualling job

Bidders take another look after client takes on more risk
5 days ago

Clancy tops £300m revenue in fifth year of growth

Civils contractor delivers £13.5m pre-tax from water and energy sector work
5 days ago

Tower crane collapses on Edinburgh resi site

Jib falls onto apartment block under construction: Video
6 days ago

Salboy drops office space from Viadux Phase Two

Developer to focus on Manchester residential towers of 76 and 23 storeys
6 days ago

Warwick Uni plan for science and engineering campus

370,000 sq ft science and engineering precinct submitted for planning
5 days ago

Morgan Sindall chalks up Greater Manchester schools treble

Bury, Stockport and Wythenshawe school jobs will create 1,600 pupil places
5 days ago

Plans in for £65m Blackpool multiversity campus

Council leads plan for Talbot Gateway learning campus
5 days ago

Laing O’Rourke wins first phase of £700m Oxford R&D district

Landmark Red Hall and two labs to be built in phase 1a of Oxford North scheme
7 days ago

Ardmore wins retrofit deal on £200m Chancery Lane office

Building will be transformed to provide 105,637 sq ft of office space
7 days ago

Construction’s “Leading Lights” recognised

More than 50 winners in latest Considerate Constructors Scheme awards
6 days ago

Balfour Beatty clinches £20m Norfolk coastal defence jobs

Firm will install rock armour at Cromer and Mundesley
6 days ago

Architects join construction union Unite

Section of Architectural Workers forms official branch
7 days ago

Boot to build £20m lightweight aviation composites factory

Work starts on Sheffield University's COMPASS R&D facility
6 days ago

GMI secures £27m Leeds City College job

Site clearance underway for new Mabgate campus
7 days ago

Balfour signs deal with Koreans for UK power transmission jobs

Contractor strengthens large-scale onshore power transmission capability
7 days ago

36 storey south London build to rent flats tower approved

Construction to start next year on £220m Croydon scheme
7 days ago

Hunt for firms for £400m volumetric offsite deal

Procurement for Housing aims to expand its pool of firms on major offsite framework
7 days ago

Contractor services