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22 MAR 2019

Tender prices expected to rise by 29%

Over the next five years (to 4Q2023) tender prices are expected to rise 29% according to the BCIS forecast issued on 6 March 2019.

Tender prices are forecast to rise by 3% over the first year of the forecast period and by 4% over the following year, then rise by an annual 6% over the remainder of the forecast period.

Building costs are forecast to rise by 21% over the forecast period, 3% over each of the first two years of the forecast period, 5% per annum over the following two years and 4% over the final year of the forecast period.
Construction materials prices are expected to rise by between 3-4% per annum over the forecast period.

The average of wage awards is expected to be at around 3% over each of the first two years of the forecast period and rise by 5–6% per annum over the remainder of the forecast period.

Very modest growth in new work output is expected for 2019, with output picking up in 2020. Stronger output growth over the final three years of the forecast period will be driven by very strong growth in the infrastructure sector, with all sectors growing over this period, and the private commercial sector returning to growth following a sharp decline over the previous three years. Over the five years 2019 to 2023, new work output is expected to rise by 23%.

BCIS All-in Tender Price Index - Annual percentage change

There is still a great deal of uncertainty over the terms that will be agreed when the UK leaves the European Union.

While almost any outcome is still possible, BCIS will continue to produce forecasts based on three scenarios; these reflect the different outcomes from the exit negotiations from the EU and are equally likely. The uncertainty of the results of the Brexit negotiations will undoubtedly lead to BCIS revising its assumptions again as more is known.

In all scenarios, it is assumed that there will be no change of UK government over the forecast period and that there is political stability in the rest of the world. A gradual rise in interest rates puts pressure on consumer spending.

Although a 'no deal' is currently being discussed as an option, this may encompass a raft of specific deals and has therefore increased the range of possible outcomes. A specific forecast for this option has not been carried out. However, the likelihood is that a 'no deal' would tend towards our downside scenario.

The BCIS Quarterly Briefing – Five year forecast of building costs and tender prices, March 2019, was published on 6 March 2019, and does not take into account the results of parliamentary votes regarding Brexit after this date.