Cost consultants at the business had previously reckoned tender prices would fall by 2.5% during 2021 as firms fought it out to refill order books post-pandemic.
But sharp materials price hikes and shortages along with a stronger than expected construction recovery have prompted a rethink. Tender prices are now forecast to grow nationally and in London by 1.5% this year, before peaking at 3.5% in 2023.
Mace also said that though the labour market was stronger than previously expected, it showed little signs of adding much to inflationary pressures for the time being.
The firm believes that the present jump in material costs is unlikley to be a threat to the recovery and will stabilise with tender price inflation settling at 2.5% in the medium term.
In the longer term the drive for sustainability and net zero carbon has the potential to place further upward pressure on tender prices, warns Mace.
Latest estimates for management, material price growth and labour costs
Steven Mason, Managing Director for Cost Consultancy at Mace, said: “The tide of uncertainty that the construction sector and wider UK economy has experienced from the impact of Brexit and Covid-19 appears to be finally turning, with global supply problems and resilient levels of demand driving dramatic increases in forecast tender prices.
“While demand in some sectors remains weak, the overall picture and sentiment for construction and infrastructure projects looks increasingly positive.
“With a risk averse supply chain that is reluctant to absorb the impact of these rising input costs, we anticipate a larger than expected impact on market prices and have adjusted our forecasts for 2021 upwards to reflect this.”
