Material costs rise outstrips tender prices

Rising tender prices are failing to keep up with spiralling materials costs, according to new data.

Tender prices rose 0.5% in the third quarter of 2010 yet materials prices rose 2% in the same period, the lastest tender price index survey shows.

The Building Cost Information Service (BCIS) said that it expected material price increases to rise in line with inflation over the next two years.

In December inflation hit 3.7%, up from 3.3% in November, with a VAT increase and rising energy costs expected to push it higher.

Peter Rumble, information services manager at BCIS, said: “Despite new work output expected to dip in 2011, it is anticipated tender prices will be driven by, and move in line with, rises in input costs over the next two years.

“A recent BCIS survey of contractors shows the majority expect tender prices to remain static over the next six months, whilst BCIS anticipates a stagnation in tender prices in the last quarter of 2010 before a slow upward trend returning in 2011. Uncertainty remains for the industry, with it being reliant on the pace of a private sector recovery.”

The BCIS is a research arm of the Royal Institution of Chartered Surveyors.