The BCIS five-year forecast for the facilities management sector sees maintenance cost inflation rising by 2.3% to Q3 2018 and by a further 2.6% to Q1 2019. It is then forecast to rise by between 2.9% and 3.8% over the next three years.

Abstract building

Maintenance costs, as measured by the BCIS All-in Maintenance Cost Index, rose by 3.7% in the year to Q3 2017.

BCIS is now assuming that there will be restrictions on the movement of labour following a two year 'transitional period' after the cessation of the period set in motion by the signing of Article 50. BCIS is assuming that this will impinge on the construction industry from around Q1 2021, as European labour moves out of the UK.

This will put upward pressure on promulgated wage awards as the unions try to keep pace with higher site rates obtained due to the reduced labour pool.

Scenario forecasts

BCIS has produced three scenario forecasts: ‘central’, ‘upside’ and ‘downside’; these terms relate to the impact on construction demand. The downside scenario results in the greatest cost increase as restrictions on workers from the European Union (EU) push up labour costs and further falls in Sterling affect materials. The three scenarios are:

  • An 'upside' scenario based on the following assumptions – The UK remains a member of the EU but with no voting rights from cessation of the two-year period following the signing of Article 50. A transitional period of two years follows, with continued payments to the EU (which will be deducted from the final 'divorce bill').
  • A 'downside' scenario based on the following assumptions – The UK has a 'hard Brexit' at the end of the two-year period following the signing of Article 50, i.e. from Q1 2019. It is assumed that following withdrawal from the EU, any trade agreements with the EU are a lot less favourable than prior to the EU Referendum, and there are restrictions on the movement of labour. It is assumed that Sterling exchange rates worsen, which adversely affects the price of imported materials and the desire of EU construction workers to work in the UK.
  • A 'central' scenario based on the following assumptions – The UK remains a member of the EU but with no voting rights from cessation of the two-year period following the signing of Article 50, i.e. from Q1 2019. A transitional period of two years follows, with continued payments to the EU (which will be deducted from the final 'divorce bill'). It is assumed that following the end of the transitional period, any trade agreements with the EU are less favourable than prior to the EU Referendum. Sterling exchange rates are expected to remain depressed until the end of the transitional period, then gradually return to pre-EU Referendum levels thereafter.

The central scenario has been used as the published forecast on BCIS Building Running Costs Online for the maintenance cost indices.

The graph below shows the three scenario forecasts.

Maintenance cost forecast (BCIS All-in Maintenance Cost Index, base 1Q1990 = 100)

 

Note: The terms 'central', 'upside' and 'downside' reflect the impact of the scenarios on overall construction demand.

The BCIS maintenance cost index and forecast, together with indices and forecasts for cleaning and energy costs, are included in the BCIS Building Running Costs Online Service.

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