Tenders prices remain depressed as construction workloads continue to fall, according to the latest Tender Price Index compiled by BCIS, the Building Cost Information Service of the RICS, published today.
The price of new construction work fell by 4.9% in the first quarter of this year and compared with the same quarter a year earlier, when the index was at its peak, it has fallen a total of 6.4 percent. BCIS predict that tender prices could see a total fall of 14.9%, from the peak period before prices start to recover in 2011.
Declining workloads continue to be the main driver for lower tenders as contractors have to keep prices at a minimum to remain competitive. New orders for construction fell 19% in the first quarter of the year, and were a massive 38% lower than the same period a year earlier.
One consolation is that costs do not appear to be rising as steeply, offering relief to those contractors whose margins were becoming very narrow. Materials costs rose 4% between January and March, compared with 7.7% in the previous quarter, and wage rates remained constant at 4.9%.
Looking ahead workloads are expected to continue falling sharply throughout 2009, and only fair slightly better in 2010, were the falls will be more moderate. Growth is not expected again until 2011 and as a result tenders will fall another 6.1% over the coming year, with a slight rise expected by 2011 of 0.5%.
“Despite some more positive news coming from the construction industry recently, it is clear that we are a long way from being out of the woods. Workloads are still significantly down on previous levels, with the private sector still set to bear the brunt of the decline,” said BCIS executive director Joe Martin.
“As a result it is likely that the price of construction work is going to continue falling for some time. However some of the pressure is easing on the costs side, which will be welcome news to those contractors who had perhaps priced too competitively.”