Surge expected in tender prices, says EC Harris

Tender prices are set to rise faster then previously expected, as a result of the strong increase in construction workload, according to the latest Economics Survey by EC Harris.

Building tender prices are forecast to increase by 4.6% over the next year and by 4.8% the following year.

In London, the escalating costs of the Olympics and the upsurge in commercial offices has led to strong growth in London tender prices, which are forecast to rise by 6.3% over the next year, and 6.5% the following year.

Encouraging workload activity in infrastructure should see tender prices here rise by 4.3% this year and 4.7% in 2008.

Commenting on the figures Paul Moore, Head of Cost Research at EC Harris, said "The construction industry has bounced back from the relative slowdown in 2005, and we have seen good levels of output over the last 12-months.

With construction workload rising faster then previously expected, building tender prices are also set to follow suit.

"The price of the London Olympics went from GBP2.3 billion to GBP3.2 billion, and is now estimated at GBP9.3 billion.

With the main construction build running from mid 2007 to mid 2011, it is unlikely that prices will slow down before then.

The biggest risks to the forecast remain an uncontrolled flood of schemes going out to tender and a slowdown in labour from Eastern Europe, which could combine to push tender price inflation even higher".

"Contractors are now opting to minimise risk, and are being selective with tenders.

This has led to it becoming increasingly difficult to get contractors to tender for more tricky schemes.

However, best results can still be achieved through negotiation or long-term relationships with framework contractors", added Moore.

The latest edition of the EC Harris economics survey is available through the EC Harris website.

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