The consultant reported that contractors were trimming margins as input costs exceeded tender price rises
Turner & Towsend is forecasting tender price growth of 2.3% for the building sector and nearly double that for infrastructure at 4.3% this year.
The consultant in its most recent market intelligence report for the UK construction industry said its latest survey of contractors saw tender prices continuing to rise despite softening demand in the buidling sector.
The reason behind the continuing rose T&T reported was increased input costs since the fall in value of sterling following the EU referendum.
“Collated contractor feedback suggests that over the next 12 months material costs will eclipse labout cost rises as the primary driver of overall construction cost inflation. It concluded that material costs wil increase by 5.5%, labour costs by 4.5% and plant costs by 3.5% over the year,” the consultant said.
T&T also reported that many contractors were having to “trim” margins because of input cost inflation exceeding tender price rises and those surveyed in the third quarter of last year reported an average margin reduction of 0.4% compared to the previous quarter.
With contractor balance sheets in a questionable state the prospect of reduced profits could compromise supply chain viability and jeopardise project completion dates, T&T warned.
However, since the Brexit vote market senitment has recovered with an acceptance that a prolonged period of uncertainty is inevitable, T&T said.
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