Mace’s latest UK tender cost update reveals how the extension of Brexit has resulted in continued uncertainty among construction firms and developers
The latest research from Mace’s cost consultancy experts explains how – following minimal output growth of 0.1% in the first quarter 2019 and a 1.9% decline in new orders numbers in the final quarter of 2018 – construction firms have been hoping for a Brexit outcome and a subsequent improvement in conditions over the summer.
Of course, an outcome has not yet materialised and is unlikely to do so until October. This means the construction industry, along with the rest of the economy, is operating in a state of limbo. In addition to the Brexit challenges, Maces’ report notes that material costs continue to rise, while construction earnings growth remains robust.
The longer this combination of a weakening industry and higher costs persists, the tougher it will become for construction firms to effectively manage projects.
Based on all of these factors, Mace has lowered its tender price forecast for 2020 from 2% to 1.5%. Beyond that, and assuming a Brexit deal occurs, forecasts remain unchanged.
Steven Mason, managing director of Cost Consultancy, said: “Ongoing uncertainty continues to test the resilience of the UK construction market and the economy as a whole. In spite of an increasing appetite to secure pipeline work, construction tender prices are being buoyed by continued increases in material input prices.
“As we move into the second half of 2019, the ability of the market place to absorb these higher costs against a background of tightening margins will be limited, and we expect tender prices to continue to increase at a modest rate through to 2020.”