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News & opinion

15 NOV 2019

Civil engineering forecast

Civil engineering prices will rise faster than cost over the next five years responding to a strong growth in demand.

However, in the first year of the of the forecast, despite strong demand, civil engineering tender prices will be dampened by uncertainty over Brexit outcomes.

Over the forecast period (2nd quarter 2019 to 2nd quarter 2024):

• infrastructure sector construction output will rise by 47%

• costs will rise by 20%

• tender prices will rise by 37%

• GDP will grow at a rate of under 2% per annum

• annual general inflation rate will rise by around 3% per annum

• interest rates will rise gradually to 1.75% in 2023

• sterling exchange rates will remain depressed for the period of the Brexit negotiations

• the main risk to materials costs will be oil prices and sterling exchange rates

• nationally agreed wage awards will be affected by restrictions in the availability of labour towards the end of the forecast period.

crosstail, tunnel, underground, RICS, SB, 050218

Civil Engineering Trends and Forecasts

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Infrastructure output graph
Source: ONS, BCIS

These forecasts are based on the following assumptions:

• The UK remains a member of the EU but with no voting rights from the end of the extended period following the signing of Article 50, i.e. from 1st quarter 2020.

• There will be a two-year transitional period. While the transition period is set to end in December 2020, it can be extended once if agreed before 1 July 2020.

• There will be an extension of two years with continued payments to the EU (which will be deducted from the final 'divorce bill'. Following the end of the transitional period, any trade agreements with the EU are less favourable than before the EU Referendum.

• Sterling exchange rates remain depressed until the end of the transitional period, then gradually return to pre-EU Referendum levels.

• Free movement of labour continues to the end of the transitional period with restrictions in movement after that. It remains desirable for EU workers to work in the UK and demand for construction operatives in the EU remains unchanged.

• GDP recovers slowly towards the end of the transitional period as confidence returns.

The full BCIS Civil Engineering Market Report is published in the BCIS Civil Engineering Trends and Forecasts online service. It contains forecasts based on two alternative assumptions about the outcome of Brexit.