Tender price forecast

The ups and downs at a glance

Current trends

• A fall in tender prices of 0.5% last quarter ends the run of five successive rises
• Demand for labour has stabilised and supply is easing in most areas
• Construction output rose 1.5% last year and is 10% higher than five years ago
• The rate of output growth fell slightly in the second half of 2000
• Profit margins are rising, partly thanks to less use of competitive tendering
• More firms expect activity to rise over the next year than have for three years
• New orders bounced back in January and February, up 9% on a year ago Forecasts
• Tender prices are expected to rise by 3­5% this year, 3­6% the next
• Total output forecast will increase 2.0-2.5% this year and 2.5-3.0% in 2002, so long as public non-housing projects compensate for a slowing private sector
• Retail is set for a boost as the supermarket chains launch expansion plans
• Most growth will be in repair and maintenance with new build up less than 1%
• The US slowdown could seriously affect construction workload in the UK

How the indices are calculated

Mechanical cost index
The MCI is based on labour rates agreed by the mechanical industry’s wage body, the JCCHVDEI, and materials prices from the Office for National Statistics.
Electrical cost index
The ECI is compiled from materials data from the Office for National Statistics and labour costs agreed by the electrical industry’s wage body, the JIBECI.
Building cost index
The BCI measures movement in contractors’ labour and materials costs. It is compiled from nationally agreed labour rates and materials prices from the ONS.
Tender price index
DL&E’s index is compiled by analysis of successful tenders worth more than £250,000. It includes movement in wage rates, discounts, plant costs, overheads and profits.