Cost update: March 2003

<B><font size="+2">Hot rates: Brickwork and blockwork</font></b>
This quarter's edition of Hot Rates looks at brickwork and blockwork, which we last visited in detail in February 1998. Since then, tender prices for brickwork and blockwork have risen by about 40% in most areas. Bricklayers continue to be in short supply almost everywhere and are generally identified by contractors as being the most difficult tradesmen to attract and retain.
The rates shown here are for commonly encountered brickwork and blockwork items associated with medium-sized building projects in the £1-5m value range. The rates are for "standard method of measurement of building works", and assume that the scheme has straightforward access. Rates include overheads and profit but exclude any allowance for preliminaries. The rates shown are averages from successful competitively bid tenders received over the past three months. Within regions, rates can vary considerably.
The "typical high" rates are expected to apply to projects in the South-east, the "typical mean" rates tend to be found in East Anglia, the South-west or the North-west and the "typical low" rates are likely in the Midlands or Wales. Rates in London can be expected to be more than those shown, whereas in Yorkshire and Humberside, the North and Scotland, rates may be beneath the typical low rates.
<B><font size="+2">Building materials</font></b>
<B>Consumer price inflation </b>
Inflation, as measured by the headline Retail Prices Index, has reached an annual figure of 2.9%, the highest level since December 2000. The annual percentage has been steadily climbing since it bottomed at 0.7% in December 2001. Leisure services have risen 8.6% over the year, driven such factors as the increase in the cost of foreign holidays. Housing costs have risen 8.4% over the year, primarily because of a massive hike in depreciation costs.
The latest forecasts compiled by the Treasury from City and independent forecasters suggest that the Retail Prices Index will have moderated to 2.5% by the end of 2003.
The government's target inflation index, the RPIX, excluding mortgage interest payments, has risen fractionally less over the past 12 months, and is now up 2.7%, just above the target figure of 2.5%. Following February's cut in interest rates, the Bank of England's monetary policy committee expects inflation to rise further above target in the near term but to fall back this year and next, settling around the target figure by the end of 2004.
However, the forecast is considered to be less certain than usual, as a result of the current world political situation. Risks to the inflation projection are reckoned to be on the up side, with an admission that the central projection may underestimate the effects of the National Insurance increase due in April.
<B>Input costs </b>
The costs of materials and fuels purchased by industry generally have risen 3.6% over the year to January, including a 1.2% jump in January alone. This increase reflects a 6.5% rise in crude oil prices, up 41% over the year, mainly because of the prospect of a possible war in Iraq and supply difficulties in Venezuela.
The index of materials and fuels purchased by the manufacturing industry, excluding food, beverages, tobacco and petroleum, has declined 0.7% over the past year and has now been negative for 18 continuous months. Fuel costs for industry have fallen 7.5% over the past 12 months since a winter 2001/02 peak, but have risen 9.1% since May.
<B>Output prices</b>
Output prices of manufactured products generally have now risen 1.6% over the past year, reflecting the highest annual rate of increase for two years.
The rise in the index has been pushed by the price of petroleum products, which have registered an 8.4% increase over the year.
The index excluding food, beverages, tobacco and petroleum products has risen a little less at 1%, though this represents the highest annual rise in the index for 27 months.
<B>Construction materials </b>
Construction materials prices have risen 4.2% over the year to January, with housebuilding materials rising 3.7%. Most of the increase occurred in April, following the introduction of the aggregates levy.
Electrical materials prices have seen a small decrease over the past year. Imported copper prices fell 21% over the two years to last October, with consequential effects on items such as cabling (down 3%) and electricity distribution and control apparatus (down 1.5% over the past nine months).
<B><font size="+2">Labour: Electricians</font></b>
The Joint Industry Board for the Electrical Contracting Industry's industrial determination 2002/03/04 was promulgated in July 2001. This provided a three-year agreement on wages and allowances effective from 7 January 2002. The second part of this agreement came into effect on 6 January 2003.
The determination continued to provide two different wage rates for graded operatives working on site, depending on whether they are transported to site by the employer or whether they provide their own transport.
The agreement provided increases in hourly rates last year of 4.4% for operatives for whom transport was provided and 5% for those providing their own transport. Operatives receiving the London rate received pay increases of 5.4% and 6.0% respectively. Travel allowances (for those with their own transport) and travelling time payments rose by 2%.
From 6 January 2003, operatives for whom transport is provided received a wage increase of 4.8% and those with their own transport received 5.0%. Operatives working in London received an additional 1% on top of these increases. Once again travel allowances and travelling time payments rose 2%. The rates that came into effect from 6 January 2003 are shown in the table above.
In 2004 the agreement provides an even higher rate of increase, with the National Standard rates rising by 7.2%. The differential for London continues to widen, as this rises 8.2%.
Over the three-year life of the agreement, electricians' hourly rates will have risen by 18% nationally and 22% in London.
The Scottish Joint Industry Board for the Electrical Contracting Industry agreed a similar three-year increase in July 2001. Hourly wage rates for the principle grades rose on 6 January 2003 to equal the National Standard Rates shown in the table 'Joint Industry Board for the Electrical Contracting Industry'.