BCIS has updated its five-year forecast for building tender prices based on its three scenarios for the UK’s withdrawal from the EU.

A modern commercial building

Although very little is still known about the exit process from the EU, there was some good news for construction in the chancellor’s Autumn Statement in terms of additional investment in both housing and infrastructure. This investment has now been included in our construction output forecasts, with a consequential effect on our three scenario forecasts for tender prices:

  • Tender price increases to slow over the next year, then rise to 24% above current prices by 2021 (‘upside’ scenario)
  • Tender price rises to slow over the next year, but remain virtually static over the following year, then rise to 13% above current levels by 2021 (‘central’ scenario).
  • Tender prices to fall by 10% over the next two years, with a recovery to 6% above current levels by 2021 (‘downside’ scenario).

Three scenarios: upside, central & downside

There is a consensus that the uncertainty created by the leave vote will lead to a slowdown. The length and depth of that slowdown will depend on various political decisions, any of which are equally possible. We have therefore produced forecasts based on three scenarios. These reflect the different political outcomes from the exit negotiations from the EU and are equally likely:

  1. An "upside" scenario based on the assumption that we will remain in the European free trade area with freedom of movement of labour.
  2. A "central" scenario based on some restrictions to trade but a largely unchanged access to labour.
  3. A 'downside' scenario based on the assumption that we do not have favourable access to the European Union market and there are restrictions on the movement of labour.

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

The central scenario

We are publishing the central scenario as the forecast for the price and cost indices, but it should be borne in mind that each scenario is equally possible.

Full details of the current construction and general economic trends and the assumptions that underlie the forecasts, together with forecasts of output, construction costs and tender prices for each scenario are available to BCIS online subscribers in the briefing section.

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