Tender prices are set to fall further next year as contractors scramble for work amid falling new orders, a new forecast is set to reveal.
Cost consultant EC Harris’s autumn market forecast will show that tender prices across the country are expected to drop by 2.2% in the year to the third quarter of 2012, then bottom out at the start of 2013, 22% below their peak at the start of 2008. In London, a slight 0.5% rise in tender prices in the third quarter of 2012 will be followed by a 2.8% rise in 2013.
That sentiment is shared by Peter Fordham, cost research associate at Davis Langdon. “Basically, there is a lack of commercial work and a lack of government work and that adds up to lower tender prices as companies chase fewer contracts,” he said.
The EC Harris research shows very few banks are lending speculatively, which is leaving many projects unable to get off the ground. A significant pipeline of planned commercial and residential work in London may also fail to materialise, warns Paul Moore, cost and technical research leader at EC Harris.
“Problems with banks lending are likely to prevent several London schemes from going ahead. For the rest of the country, workloads have been hit by private sector clients unwilling to invest outside the capital and swingeing public sector cuts,” said Moore.
Vance Babbage, director B&M Babbage, added: ”The industry’s flat, prices are crazy, everyone’s trying to cling on to a job, almost for any cost.”
The forecast drop in tender prices reflects continued pressure from clients to cut costs, says Chris Gilmour, design and marketing director at Bam Construct UK: “Look at government contracts, where they want 30% stripped from the cost of constructing schools. Around 20% of that figure has probably already come out of prices thanks to more competitive bidding.”