'Five year wait' for tender prices to regain 2009 level

Tender prices will not return to today’s levels for another five years, according to an exclusive compilation of forecasts from a range of QSs.

The consultants say prolonged falls in tender prices will lead to further hardship for the industry, including redundancies, insolvencies and litigation.

The figures are compiled from five-year estimates by Davis Langdon, Cyril Sweett, EC Harris and Gleeds. They predict that by 2014, prices will have recovered to 1.7% above today’s level.

Paul Moore, head of cost research at EC Harris, said: “There’s general agreement that prices will fall for the next couple of years, bottoming out in mid to late-2011 and bumping along the bottom until mid-2012.”

Martin Smout, chairman and chief executive of GB Building Solutions, said: “If accurate, these figures would mean significantly more insolvencies, leading to a massive decrease in the industry’s capabilities.”

Sarah Davidson, head of corporate research at Gleeds, said: “If tender prices continue falling into 2011, we are all going to be suffering for a long time.”

She added that clients should avoid traditional lump-sum competitive tendering. “Clients must realise this is not the best policy. If they award long-term contracts, subcontractors’ costs may go up and the main contractor will have to find the money elsewhere, including through claims.”

Simon Rawlinson, a partner in Davis Langdon, said prices would eventually inch up because “even if output growth is limited, increasing raw material prices and reduced capacity” would lead to pressure on prices.