Industry experts, analysts and contractors are concerned about the impact Brexit will have on tender prices.
Professional services and investment company JLL has released a list of predictions about the effect Brexit could have on the construction sector. It includes higher tender prices, reduced staff and worker availability and changes to safety standards.
The company predicts that tender prices will rise 3.5% over the year because of a multitude of factors, including Brexit.
Although an economic downturn would generally be associated with lower tender costs, the cost of importing materials like steel could push prices up.
Civil Engineering Contractors Association (Ceca) chief executive Alasdair Reisner said that the most recent survey by Ceca showed that tender prices were at their highest since the second quarter of 2015 – but he added that intense complexity of the Brexit situation meant it was impossible to know if this was direct fallout from the UK’s efforts to leave the European Union.
“Compared to 12 months ago, tender prices were higher on balance for 58% of firms for new construction work and improvement, and 43% for repair and maintenance work,” Reisner told New Civil Engineer. “The former marks the highest balance since 2015 Q2.”
But the industry is not united in its view. Consultant Mace has predicted that tendering costs will only rise by 1% to 2% in the coming year, and predicts that Brexit is “unlikely” to have an effect.
“However, the uncertainty surrounding the final result of ongoing Brexit negotiations mean that the forecast for 2019 and beyond is uncertain, but is unlikely to produce any significant price increases,” Mace detailed in its annual predictions.
Mace cost consultancy managing director Steven Mason said that he expected a small increase in tender costs leading up to 2022.
“2018 continued to be a year of mixed messages and contradictions, with strong third quarter growth in the construction sector and easing material and wage growth being tempered by the continuing sense of unease and uncertainty around the strength of the UK economy in 2019,” he said.
“Despite this sense of déjà-vu and caution in the market place, we see no sign of input costs going down and continue to expect a small increase in tender prices in the year ahead.”
JLL’s Predictions for the Construction industry:
- 3.5% increase in tender costs over the year caused by multiple factors, not just Brexit
- Potential threats to the viability of projects caused by currency fluctuations and issues concerning EU staff, whatever happens with Brexit
- A likely increase in the Energy Performance Certificate minimum standards, where the government looks set to lift the minimum to C by 2030
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