Cost consultant Arcadis has cautioned that the window of opportunity for investment in ‘shovel-ready’ schemes could close very quickly as the industry starts to overheat from a faster than expected recovery.
The full extent of the financial stress is only now becoming apparent warns Arcadis in its latest tender price forecast.
This, combined with a buoyant new orders pipeline, suggests there may be less spare capacity in the supply chain than previously thought.
Arcadis is now forecasting a major acceleration in price increases for infrastructure, and a slightly more modest expansion in the buildings sector from 2022.
Infrastructure in particular is susceptible to pressures around materials availability and a shortage of specialist skills, with price increases of 3% and 5% being forecast for 2021 and 2022 respectively.
For the buildings sector, growth in the regions will be higher than in London.
But delays in getting projects moving are likely to translate into an even steeper pace of inflationary growth from 2022 onwards, reaching 5% by 2025 as the market recovers.
Agnieszka Krzyzaniak, Market Intelligence Lead at Arcadis, said: “The conditions for investment are good, but with so many challenges on the horizon, the situation can change abruptly.
“At the moment, there is still some spare capacity available, but the shortages of construction materials create inflationary conditions that have already begun to outweigh any deflationary factors.
“Clients need to move quickly to take advantage of this window of opportunity.
“Any delays increase the potential exposure to much higher construction costs than initially planned for, as higher inflation becomes the new normal.”