Mace has announced no change to its tender price forecast for the third quarter in 2023 – though urged caution in future fiscal quarters amid ongoing uncertainty surrounding key UK infrastructure projects and the potential for electoral influences on sector policies.
In its Market View Q3 report the consultancy and construction business predicted a maintained forecast of 3% for London and 3.5% in the rest of the UK for the year.
It said this was due, in part, to both “positive and negative influences” balancing costs for the construction industry.
A key factor impacting the forecast included the continued dip in material costs, with prices dropping over the summer and now noticeably down compared to a year ago.
This reduction, said Mace, has primarily been driven by a reduced cost in steel and wood, although other materials do continue to rise.
The report also highlights a slight increase in construction output, up by 0.3% in Q2 – making it a 1.2% increase in the first six months of the year.
However, this increase is attributed to a rise in repairs and maintenance (R&M) works, rather than new construction projects.
The report also cautioned firms and warned of ‘continued uncertainty’ being an ongoing challenge for the construction industry in the coming quarters, stemming, in part, from issues such as the unfolding RAAC debacle affecting public buildings, the precarious future of major infrastructure programmes such as HS2, high interest rates and inflation, and political influences coming from the UK General Election in 2025.
“The economy continued to struggle over the past quarter and is likely to persist into 2024,” said Andy Beard, global head of cost and commercial management at Mace.
“Against this backdrop, the Bank of England has tightened monetary policy further and this is causing significant challenges for construction’s largest sector – housing.
“Inflation may be easing but it is still far too high, and despite construction material prices now falling, the pressure caused from historical increases is still a major issue.
“Given the fiscal squeeze caused by higher interest rates and inflation, it was always likely that public spending would come under pressure.
“If Q3 sees another very low set of new orders data, we may need to lower our tender price forecasts. An impending general election only adds to market unpredictability.”
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