Commodity rate hikes set to push up tender prices by as much as 5%

Increases in material and commodity prices will lead to a further than expected hike in tender prices for the next three years, according to a new report by Gardiner & Theobald.

The firm said recent jumps in copper and timber rates would affect tender prices. Steelmaker Corus also this week announced a £30 per tonne increase in structural steel as of October.

The jump in material prices and a rise in construction activity will add 0.5% to predicted increases in tender prices for this year, 2007 and 2008, according to G&T’s second quarter report (see box). This is still less than the predicted rises by rivals Davis Langdon, EC Harris and the BCIS.

The report stressed that the effect of copper and timber rises would affect projects differently. “Copper prices affecting wiring and M&E installations could be most marked on office fit-out projects or process/production facilities but may have little effect on residential,” it said. Timber hikes would have the opposite effect, being more significant on housing projects. Neither copper nor timber rises would have an effect on steel framed, metal clad industrial or warehouse buildings, the report concluded.

G&T predicted a greater than average rise in tender prices in Scotland. The firm claimed rates would jump by 5% in the next three years, compared to 4% this year and 3.5% in 2007 and 2008. Scotland’s tender increase was only matched by London’s, whose levels are expected to rise by 5% this year and next and further jump by 5.5% in 2008, according to the report.

The firm said work on the Olympics may impose a premium on tender prices “where competition for skills and resources against a finite construction programme period becomes manifest”.

For the full regional breakdown of G&T’s tender price report, go to qsnews.co.uk.