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23 MAY 2019

Civil engineering forecast: May 2019

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

Over the forecast period (4Q2018 to 4Q2023) BCIS expect that:

  • infrastructure sector construction output will rise by 49%
  • costs will rise 20%
  • tender prices will rise 37%
  • UK GDP will grow at a rate of under 2% per annum
  • UK annual general inflation rate will rise by around 3% per annum
  • interest rates will rise gradually to 2.25% 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

Infrastructure output, costs and tender prices – annual percentage change

Forecast graph (with title)
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 cessation of the expiry of the extended period following the signing of Article 50, i.e. from 4th quarter 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 before 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.
  • Free movement of labour continues to the end of the transitional period with restrictions in movement after that. It is assumed that it remains desirable for EU workers to work in the UK and that 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.