Contractors are picking and choosing work as they snub clients perceived to be high risk.

The shift in the balance of power comes against a backdrop of rising workloads and growing skills shortages according to AECOM’s 2014 London Contractors Survey.

The survey polled main contractors with a combined UK turnover of almost £7bn plus a swathe of leading specialists.

Contractors quizzed included Laing O’Rourke, Mace, Kier, Brookfield Multiplex, Skanska and Willmott Dixon.

AECOM is also forecasting that 2014 will end with 5-6% tender price inflation in the London market, and is predicting inflation of 5.1% in 2015 and 5.3% in 2016.

Labour shortages are now the primary driver for price rises, with specialists in concrete and brickwork continuing to be in demand with growing demand for joinery and dry lining.

The survey predicts that electrical engineers will be the next profession to see strong pick-up in demand.

AECOM director Brian Smith said: “Clients are seeing sustained and increased tender prices – what we forecast a year ago has become a reality.

“Contractors are now becoming far more selective, assessing project attractiveness and risks.

“Stable relationships between clients and contractors are becoming ever more important.

“Procurement route, work type and the location of work are also increasingly being given as reasons to tender or not to tender, with many contractors now only willing to accept work on a negotiated basis.

“However, it is important to remember that overall price levels are still lower than they were in 2008, and even at the rates of inflation we forecast they will not get back to their previous peak until 2017.”

The other driver for price rises is increasing contractor margins.

Clients who have engaged in an adversarial relationship with contractors are finding the boot on the other foot, with contractors able to turn down work in favour of clients who have worked on a more collaborative basis.

Refurbishments or work on complex projects which entail substantial risk for contractors are also becoming increasingly difficult to invite contractors to bid for.

The AECOM survey also found that London contractors have on average already secured 71% of their turnover for 2015, which is higher than the 67% secured for 2014 at the same time last year.

But there are early signs that after 18 months of strong activity the market may be adjusting to a lower rate of annual growth, with contractors having only secured 26% of their work for 2016 and 9% for 2017 – with the two year pipeline figure being lower than in 2013’s poll but the three year figure marginally higher.

The full list of contractors taking part in the AECOM 2014 London Contractors Survey is Ardmore, Bam, Brookfield Multiplex, Galliford Try, Kier, Laing O’Rourke, Mace, Midgard, Skanska, Walter Lilly,
Wates Construction and Willmott Dixon.

An additional 16 specialist subcontractors also completed the survey.