Mace doubles tender price inflation forecast

Grant Prior 3 weeks ago
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Tender prices are predicted to grow by another 3% this year as experts at Mace doubled their inflation rate predictions as materials prices continue to soar.

Mace’s latest price rise forecasts are up from 1.5% last time and next year’s predictions have also been revised by 1.5%, pushing it up to 3.5%.

Material prices were 6.6% higher in June than they were in March, with a further month-on-month jump of 4.5% in July.

The rises also factor in a domestic shortage of HGV drivers which “will continue to have an impact, not just on material and tender costs, but on delivery timescales and construction output.”

Mace’s Market View also warned that pay rates will hit tender prices with construction vacancies jumping to 38,000 in the three months to July – over 10,000 more than seen on average in the few years before the pandemic.

Steven Mason, Managing Director for Cost Consultancy at Mace, said: While there are indications that some material prices may be starting to ease, there is increasing expectation that the labour market is starting to tighten with the potential to drive costs up further.

“As market confidence and the work pipeline improves, the supply chain has become more reluctant to absorb these sustained increases in input costs.

“The underlying expectation that market activity will continue to increase as the workforce starts to return to the workplace only heightens the sense that tender prices will continue to rise as we progress towards the final quarter of the year, and we have adjusted our forecasts for 2021 upwards to reflect this.”

Consultant Turner & Townsend is warning that some projects may see inflation levels as high as 10% next year.

It added that high inflation could be a factor for the next five years before “normalising” to 4.5% in 2025.

Martin Sudweeks, UK managing director of cost management at Turner & Townsend said: “Across the UK and beyond we are seeing structural changes post-pandemic that are reshaping our communities, our places of work, and our connections between the two.

“In the face of sustained and once in a generation pressure on resources, UK construction and the sectors it supports need to recognise that inflation is likely to stay high for the medium term.

“Tried and tested routes to curbing prices, from challenging specifications to recalibrating project timetables, are not enough.  This is especially true when it comes to decarbonisation, where it is it not a case of when or whether we can afford net zero, but how we do so.

“The sector needs to adopt a more programmatic perspective on managing costs, understanding how competing agendas will interact over time and how that impacts investment performance.”

 

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