Mace has upped its tender price forecasts for 2015, driven by improving demand and contractors’ increasing profit margins.
According to Construction News, the firm’s consultancy business has revised its tender price forecasts for the UK up to 4.5 per cent for this year, up from 3.5 per cent, while tender price forecasts for London have been revised to 5.5 per cent, up from 4.5 per cent.
Growth is expected to stand at 4 per cent next year for both the UK and London, and will continue to grow at 4 per cent in 2017 for the UK, although the London market will see a slowdown to 3.5 per cent.
Cost growth will slow as the industry expands supply capacity to meet demand, according to the forecasts.
Materials costs are forecast to follow the cost of inflation, with increases of 2 per cent expected for most materials.
Similarly, labour costs are expected to remain stable throughout the year, with the consultancy predicting “subdued upward movement” in the medium term.
In the long term, there could be an “acceleration” in labour costs from 2016 onwards.
Regionally, the consultancy expects tender prices to increase over the course of the year as work spreads out from London.
Chris Goldthorpe, managing director of Mace Cost Consultancy, said: “Having lived through six years of recession, contractors are now taking the opportunity to improve margins and continue to be selective in the projects they are willing to undertake.
“Projects that are complex or have specific difficulties to overcome need flexible procurement methods and skilled negotiation in order to achieve value for the client.
“Because of the strength of demand, contractors and sub-contractors are able to fill their order books without having to offer cut-throat prices and they are able to increase profit margins, particularly for those projects that they are not particularly keen on winning.”