Tender prices continue on an upward trend, with a rise of 0.9 per cent in Q1 2011 compared to the previous quarter according to the latest UK construction Tender Price Index compiled by BCIS.
Tender prices rose by a total of 4.8 per cent in Q1 2011 compared with the same quarter a year earlier, but the increase is exaggerated somewhat by tender prices still falling in Q1 2010. Tender prices have been on a general upward trend since Q2 2010. BCIS anticipate that despite new work output being forecast to fall in 2011 and 2012, tender prices will continue on an upward trend over the coming two years, driven by increases in input costs.
Materials costs rose 7.6 per cent over the past year to Q1 2011. It is anticipated that materials prices will continue to rise in 2011 with Q1 showing sharp rises in the price of crushed rock, precast concrete, paint, asphalt, lead, copper, steel reinforcement and fabricated steelwork. Some materials prices however have decreased including sand, gravel, clay bricks, imported sawn and planed wood. Oil prices continue to rise steeply with Q1 2011 showing a 20 per cent increase on the previous quarter.
Quarter one 2011 saw a fall in construction employment figures by one per cent on the previous quarter. Despite average weekly earnings in the economy as a whole rising 2.1 per cent in Q1 2011compared with a year earlier, average weekly earnings within the construction sector remained unchanged. Nationally agreed wage rates saw a 1.3 per cent annual increase, and BCIS anticipates wage awards will rise behind the level of general inflation over the next two years, and remain subdued due to workloads being significantly below pre-recession levels.
Analysis of new work output in Q1 2011 compared with Q1 2010 shows growth in all new work sectors except the private commercial sector. The public and private housing sectors had double digit increases as did the private industrial sector.
Following a 15 per cent increase in new work output in 2010, output is expected to fall throughout 2011 & 2012 as cuts in public sector investment take effect. 2012 will start to see private sector work mitigating the effects of declining public sector output aided by increased output in the infrastructure sector.
The total volume of construction orders in Great Britain fell by 23 per cent in Q1 2011 compared with the previous quarter and fell by 18 per cent compared to the same quarter a year earlier.
Peter Rumble, Information Services Manager at BCIS commented:
"Tender prices are expected to rise by around three per cent per annum over the next two years, primarily as a result of cost push factors. With new work output expected to fall in 2011 and 2012, it is anticipated that the level of new work output will be around eight per cent below the pre-recession level of 2007 in 2012, but eight per cent above the low point of the recession in 2009."
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