Mace revises up tender price forecasts amid cost inflation

Mace has revised up its tender price forecasts for this year in the latest sign the contracting market is heating up.

The firm’s cost consultancy arm said it has revised up its tender price forecast for this year to 2% growth in the UK and 3.5% growth in London, up 0.5% and 1% on Mace’s last set of forecasts in the fourth quarter of last year.

Mace said that the increased inflation forecasts for construction reflected the fact that contractors were taking a “more realistic assessment of risks and inflation” and firms down the supply chain were pricing costs and margins “at more realistic levels”.

The company also found that while input costs were rising in some areas – particularly trade wages in the booming housing sector – the biggest factor behind inflation was “reduced risk taking”, with contractors now pricing projects that made “proper allowances for risks and inflation”.

Mace is likely to be the first of many cost consultants to revise up tender forecasts for 2014 as the recovery gains momentum.

Gardiner & Theobald – which currently forecasts 2.5% tender price growth in the UK and 3% growth in London – told Building that it was also in the process of revising up its forecasts.

Partner Gavin Murgatroyd said tender price inflation this year could hit 5% on some “specific types of projects in London”.