Tender prices in the UK rose by 1.1% in the second quarter of 2015 compared with the previous quarter, and by 4.7% compared with the same quarter in 2014, according to the latest report from the Royal Institution of Chartered Surveyors’ (RICS’) Building Cost Information Service (BCIS).
The BCIS report also predicts that annual tender prices will continue to rise over the next six months, but at a slower rate than the previous four quarters, as contractors begin to cope with the strong increase in workloads.
Materials prices fell by 0.4% in the second quarter of 2015 compared with the previous quarter, and by 0.8% compared with the same quarter a year earlier. This is the third consecutive quarterly fall in materials prices.
However, it is expected that overall materials prices will rise sharply in the year to the third quarter of 2016, increasing by 4.6%, driven by rising metal prices and oil derivative prices. Over the remainder of the five-year forecast, materials prices will rise at a steady rate of 4% per year.
Peter Rumble, head of forecasting, said, “The UK construction industry continues to show signs of growth. This is reflected in the BCIS forecast which shows strong increases in new work output.
“While this growth will slow a little over the next four years, it will still maintain momentum with resurgence to a high 5% growth rate in 2020. As a result, tender prices are forecast to rise by 5.5% in the year to the third quarter of 2016. Moving forward, as workloads continue to increase, tender prices are expected to rise between 5% and 6% per year over the remainder of the forecast period.”
Meanwhile, construction activity has decreased in the third quarter of 2015, according to the UK’s Construction Products Association (CPA).
However, it expects further growth in the industry, increasing 3.6% and 3.8% in 2015 and 2016, respectively. This is down from the original forecast of 4.9% and 4.2% in CPA’s summer forecast.
Construction output is expected to rise by 19.7% between 2015 and 2019, driven by growth in the three largest construction sectors - private housing, commercial and infrastructure.