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Construction contractors turn down a third of opportunities in London

Construction contractors are turning down one in three bidding opportunities in London, a survey by Aecom has revealed.

According to Construction News, the London Contractors Survey polled 28 firms, including Bam Construction, Galliford Try, Kier, Laing O’Rourke, Skanska, Wates and Willmott Dixon.

It found that contractors were becoming more selective when bidding for work, by turning down a third of opportunities from projects and clients they believed to carry higher risk.

Contractors said they preferred to work with collaborative clients, while they turned down work with adversarial clients or on refurbishment or complex projects.

Aecom is forecasting that 2014 will end having seen tender price inflation in London of 5 to 6 per cent in 2014. It predicts inflation of 5.1 per cent in 2015 and 5.3 per cent in 2016.

It said labour shortages were the main driver of price inflation, with specialists in concrete, brickwork, joinery and dry-lining in high demand, with electrical engineers expected to be the next specialists to see a strong pick-up in demand.

Research by the London Chamber of Commerce and KPMG last month found that London and the South-east could be facing a 20 per cent labour shortfall by as early as April 2015 with £96bn-worth of projects set to come through the capital’s pipeline between 2014 and 2017.

Aecom director Brian Smith said: “Stable relationships between clients and contractors are becoming ever more important. Procurement route, work type and the location of work are also increasingly being given as reasons to tender or not to tender, with many contractors now only willing to accept work on a negotiated basis.

“However, it is important to remember that overall price levels are still lower than they were in 2008, and even at the rates of inflation we forecast they will not get back to their previous peak until 2017.”

The survey also found that London contractors had on average already secured 71 per cent of their turnover for 2015, compared with 67 per cent secured for 2014 at the same time last year.

They had secured 26 per cent of their work for 2016 and 9 per cent for 2017, with the two-year pipeline figure being lower than in 2013’s poll, but the three-year figure marginally higher.

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