Bid prices will rise more than expected this year, a key report has warned, as labor costs continue to rise.
Contractor and consultancy Mace raised its tender price inflation forecast for 2023 to 3% in London and 3.5% outside the capital.
In its latest UK Market View report, the firm said rising pay rates for construction workers left it with “little choice” but to revise upwards its predictions from a previous rate of the whole of the UK from 2.5 per cent.
Annual growth in construction labor rates is above 6 percent, according to Mace.
Its updated forecasts mean a job outside London that cost a client £100m last year is likely to be £1m more expensive than previously expected by 2023.
And Mace sees little respite in the foreseeable future, with prices expected to rise by 2 to 3.5 per cent each year until 2027. An off-equity project valued at £100m in 2022 would be worth 116, £5m five years later as forecast. changes.
Meanwhile, data from the Office for National Statistics released today (June 21) show that the consumer price index measure of headline inflation remained at 8.7% in May, meaning raised fears that the Bank of England will raise interest rates further on Thursday (June 22).
Mace said this economic context was holding back home building and creating a drag on bid prices. However, the company added that stagnant, rather than falling, economic growth coupled with rising wages is tipping the scales towards higher deal values.
Global head of cost and business management, Andy Beard, said: “Despite the inflation news, we are in a much more hopeful position than we were a quarter ago. The economy has held up better than seemed likely at the start of the year and prices have reacted accordingly.
“Currently, the pay in construction is going above and beyond, and we have little choice but to increase the tender prices for this year.”
