Squeezed credit supply will see companies continue to hit the wall, consultant adds
Mace has said tender price inflation will ease next year as uncertainties about the economy and firms being more selective about which jobs they bid for will put the brakes on rises.
And it warned it expected more companies to go to the wall next year as the squeeze on credit remains.
Andy Beard, global head of cost and commercial management at Mace, said: “By making it harder to secure credit, the Bank of England has contributed to one of this year’s biggest problems for construction, which has been the high number of insolvencies.
“Similarly, as [it] is unlikely to start easing interest rates anytime soon, we expect insolvencies to remain a problem for projects. As a result, the importance of managing the supply chain must still be treated as a priority by consultants, as well as clients and the wider project team.”
Mace said inflation this year nationally would hit 3.5% and 3% in London but these figures will fall back to 2.5% and 2% next year respectively.
It added: “Weak growth next year is the reason we expect tender price inflation to ease somewhat.
“Having already squeezed margins as far as they can go, many firms continue to take a view that there are considerable risks and uncertainties in delivering schemes. As such, they are often being highly selective about what they tender for.
“Added to this, most material prices have only started to fall recently and are coming down slowly, wage pressures and skills shortages are still prevalent, and rising insolvencies are reducing the number of available subcontractors.”
The report said that new orders in Q3 were down 20% on the same period last year meaning output is likely to suffer in 2024 as well.
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