Contractors margins rising in buoyant market

Upturn in construction workload and the contracting scene means contractors can increase their margins says latest EC Harris economics survey available through their web site.

The upturn in construction workload and the contracting scene means contractors can increase their margins and become more selective about tendering, according to the latest forecast produced by international consultancy EC Harris.

As a result tender prices are forecast to rise nationally by 3.5 per cent in the year to second quarter 2007, with prices in London increasing by 5.3 per cent.

The forecast outlines how the upturn in activity has seen contractors turning away opportunities, without even going through the motions of expressions of interest.

In this market, the selection of the best procurement route and strategic engagement with the supply chain has become increasingly important in securing competitive prices.

Commenting on the figures Tom Kane of EC Harris, said: "We are finding that the market situation means that pre-qualification checks are becoming more and more important to ensure that the 'right' people are tendering".

"And it's not just the right contractor; just as important for a successful contract is getting the right team on board".

"Here the client is important, with contractors reserving their 'A' team for high profile clients who can guarantee an ongoing substantial volume of work." He went on, "Workload has picked up from last year's slump and we are poised at the threshold of a number of significant changes which have the potential to change the face of the industry".

"Major city centre regeneration schemes, REITS, increasing environmental requirements and changes in planning laws to increase social housing units could all contribute to a change in the face of a number of inner cities over the next few years".

""Construction activity is expected to show solid, if unspectacular, growth this year, with a further increase in demand over the following two years.

The main drivers for the recovery are expected to be the private commercial and housing sectors, while health and education spending should continue to grow and increases in infrastructure spending will provide a solid backdrop to the resurgence in building work".

""With a continued high level of demand for contractors' services, tender prices in the UK are forecast to increase faster than retail price inflation over the next couple of years".

"Thereafter, as the workload kicks in for the London Games from mid 2007 onwards, there is not expected to be any slowdown in either workload or prices".

The inflation forecast, which is published in the latest edition of the EC Harris economics survey is available through the EC Harris web site.

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