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Tender prices fall further but costs stabilise, latest figures reveal

Tender prices fell for the seventh consecutive quarter in the third quarter of 2009, says the latest UK Tender Price Index compiled by the Building Cost Information Service (BCIS).

The price of new construction tenders fell a further 0.9% in the third quarter 2009, and now stands 12.2% down on the same time last year. BCIS predicts prices will fall a further 4% through 2010 before returning to growth in 2011.

BCIS publishes information on the capital cost of new and refurbished work collected from chartered quantity surveyors and others working in the building industry.  BCIS is a trading name of the Royal Institute of Chartered Surveyors and was established in 1962 to exchange detailed building price information.

BCIS’s General Building Cost Index, also released today, remained virtually unchanged in the third quarter rising by only 0.4%. This follows two quarters of falling costs and over the year costs fell a total of 1%, the first year on year fall since the series started in 1978.

This fall will bring a small amount of relief to the construction firms, who were suffering from annual rising costs of seven percent a year ago.

In terms of activity, the market is still quite weak which is helping to drive down tender prices. New orders for construction fell by 1% in the third quarter and by 3%when compared with the same period in 2008. New work output also continued to fall significantly, recording a drop of 13% when compared with the same period a year ago.

“The drop in costs is due to falling material prices and a pay freeze for many construction workers,” said BCIS executive director Joe Martin. “However falling costs will only bring limited relief as tender prices are expected to continue to fall through to the end of 2010 whilst demand remains weak.”

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