Core Five says worries over who will build major projects have not gone away

Cost consultant Core Five has again warned that there are not enough contractors willing to bid jobs over £250m.

In its latest quarterly report, the firm says there is a “reduced pool of willing and able main and sub contractors” for building schemes worth £250m or more.

And it said developers looking to turn on the taps for stalled schemes may find themselves with no one to build their jobs if a glut of projects come onto the market at the same time.

It added: “The key challenge is around capacity for larger schemes. These concerns may be exacerbated if the large number of schemes at stage 3 do progress. This then cascades down, creating the race for tier 2 contractors.”

Currently, only Mace and Multiplex are prepared to regularly bid schemes worth more than £250m. Uncertainty hangs over Lendlease, another would-be bidder for this type of scheme, after it was put up for sale in May by its Australian parent.

Laing O’Rourke is concentrating more and more on negotiated or public sector work while Skanska, winner earlier this year of the £250m Hill House scheme in the City, doesn’t regularly appear on shortlists for jobs worth more than £250m. And Sir Robert McAlpine is believed to favour construction management jobs over design and build work.

>> See also: Rumour mill churns as industry waits on Lendlease future

The report also said the battle for M&E subcontractors was also hotting up with capacity in the sector tied up in data centre work while insolvencies meant the available pool of firms able to do jobs was also dwindling.

It also warned that both clients and contractors faced increased competition for labour.

“We may be at foothills of a labour supply crunch,” it warned. “The construction sector has maintained output even as it has lost workers. This paradox can be partially explained by a slowdown in labour intensive parts of the sector like housebuilding. Now that demand is returning labour supply problems will start to bite.”

The report said that developers looking to dust down mothballed projects should start to buy material and labour now – before prices barrel northwards.

“Developers that choose to wait for more policy certainty from the budget and lower interest rates, risk competing with a hotter sector when projects start,” it added.

It said its mainstream tender prices index is 1% for this year, jumping to 3.5% in 2025 and 4% 2026, reflecting the likely uptick in demand.

And it said tender price rises for major projects, which it classifies as those over £100m, would be 1.5% this year, 4% next and 4.5% in 2026.