Tender price inflation could drop next year, says G&T

Tender price inflation could be lower than previously expected next year if contractor pipelines begin to dry up, says Gardiner & Theobald (G&T). 

The consultant has pared back its UK tender price inflation forecast for 2024 by 0.25% to 2.25%, below the long-term average. 

The prediction is based on the expectation that construction demand begins to fall in the second half of this year as high interest rates and borrowing costs begin to weigh on clients. 

While the report said pipelines “remain resilient”, this was largely attributed to the “spill over effects” of a strong 2022. 

“The record-high levels of output and demand are unlikely to be sustained as we forecast weaker activity in 2024 with the industry moving from growth to stabilisation,” it said. 

G&T stuck by its 2.75% tender price inflation for 2023, as well as most of its regional predictions. 

The South West and Yorkshire & Humber forecasts were both increased by 0.5% to 3.75% and 3%, respectively, while predicted inflation for Scotland was downgraded by half a percentage point to 2.25%. 

The inflationary profile for 2023 is anticipated to be one of higher tender price rises in the first half, declining later in the year. 

The consultant’s TPI survey reported a busy market with broadly positive sentiment “in contrast to the gloomier outlook of previous months”. 

But there were “more negative perceptions about future workload prospects”, with a cooling of new starts in housing and residential anticipated due to planning delays and a difficult funding environment.