QSs forecast stronger price rises as failures take overcapacity out of market

Last summer, most QSs forecast that prices would return to their mid-2009 level in 2015. Six months on, the picture has brightened and the predominant view is that prices will begin to rise next year and reach last year’s level in 2013.

The firms surveyed were EC Harris, Davis Langdon, Capita Symonds and Gleeds. Their aggregate view was that tender prices will go up by 1.2% in the year to the first quarter 2012. Six months ago, the firms predicted a 1.5% drop between July 2010 and June 2011.

Simon Rawlinson, a partner in Davis Langdon, said he thought prices would reach bottom sooner than previously expected. He said: “We’re now looking at first quarter 2011 rather than the second or third quarter. So the recovery is a little bit faster than we had expected.”

There appears to be a limited amount of light at the end of the tunnel

Paul Moore, EC Harris

He said the upturn would mainly be the result of a lack of competition caused by more companies going out of business, rather than a strengthening of the market. He said: “Infrastructure is robust with projects like Crossrail in the pipeline, but if that were cancelled, the picture could change rapidly.”

Paul Moore, head of cost research at EC Harris, which had the most pessimistic outlook of the companies surveyed, said: “There appears to be a limited amount of light at the end of the tunnel as some of the major developers in London are taking a longer term view and are looking to invest in schemes that will start on site before prices start to pick up.”