The Tender Price Index put together by the Royal Institute of Chartered Surveyors’ Building Cost Information Service (BCIS) suggests contractors do not want to risk a backlash from clients facing problems securing finance for new orders.
The index showed the price of new construction work in the first quarter of 2008 fell by 2.4 percent compared with the previous quarter whilst costs rose by 1.1 percent in the same period.
However, BCIS predicted the increasing pressure of rising input costs would eventually see prices rise during 2008 – as long as demand remains reasonably stable.
The increasing pressure of rising input costs however should see tender prices improve throughout 2008 providing demand remains reasonably stable.
Peter Rumble, BCIS Information Services Manager, said: “Contractors appear to be a little nervous about future workloads currently, and with new work output expected to fall slightly this year, input cost rises are likely to be the key driver of tender price rises.
“Input cost rises are currently quite strong, and are expected to remain so over the coming year.
“The credit crunch and the slowdown in economic growth are expected to have a greater effect on construction output than first thought. However, it is anticipated that the public non housing and infrastructure sectors will both grow over the next three years, with particularly strong growth in 2008 and 2009.”
An increase in infrastructure, public non-housing and commercial project work has kept workloads stable despite a six per cent drop in public housing and 10 per cent fall in private housing workloads.
BCIS said it expected new work output to fall in 2008, with output remaining the same in 2009 and finally increasing in 2010.