2020 tender forecast remains unchanged, but risks are mounting
Mace’s latest tender cost forecast for the third quarter of 2019 has held steady with a predicted tender price growth of 1.5% for 2020.
Reviewing the latest financial and economic performance figures, Mace’s cost consultancy team flagged that Brexit uncertainty and global issues like the US-China trade war are likely to drive challenging industry behaviours and hold the potential to put further pressure on tender prices.
As a whole, the UK construction industry contracted 1.3% in Q2, while GDP fell 0.2%. Despite the gloomy economic figures, new orders in construction rose to 9.6% and material price inflation eased to 3%, its lowest level since 2016.
Among other concerns, the report also highlighted a weakening labour market and currency fluctuations – particularly the depreciation of the pound – as two areas of concern.
However, the report makes clear that global events could result in more challenging conditions emerging. The report highlights that a No Deal Brexit, for example, has the potential to significantly disrupt the construction supply chain and result in even lower tender prices.
The forecast for 2021 remains more upbeat, with Mace predicting a 2.5% growth in tender prices, but this is under the assumption of a smooth Brexit deal and transition process.
Steven Mason, Managing Director for Mace Cost Consultancy, said:
“The overriding sense of unease in the UK construction market continues as the impact of Brexit uncertainty, domestic political turmoil and global economic concerns take their toll. While there is a growing appetite to secure workload for 2020, for now tender prices remain steady as the downside risks continue to be offset by strong input costs.
“However, the likely impact of a No Deal Brexit will put more pressure on the supply chain. As the combination of potential reduced demand with further increases in material and labour costs will inevitably affect margins, tender prices will feel a downward pressure.”
Download our latest tender cost update report to find out more.