Oct 1 2009
Tender prices may not start rising until 2011 and will not return to pre-recession levels for at least five years.
Latest forecasts from the Building Cost Information Service show tender prices are predicted to fall 5.2% in 2009 and a further 1.8% in 2010, before returning to 3.3% growth in 2011.
The decreases mirror sharp declines in new work through 2009 with slower falls expected in 2010 before returning to modest growth in 2011.
But the forecasters have also prepared for a worse-case scenario if the recession in housing, industrial and commercial in the private sector is more drawn out than predicted in the central forecast.
If growth does not return until 2012, then the price of new construction work will continue to fall through 2011 at a rate of 1.9%. A cut in public spending would have a similar effect on tender prices, meaning tenders would suffer around a 15% peak to trough fall over a period of four years.
Such cuts would also see the rate of growth in tender prices, once it comes, move more slowly. If public spending in construction were to be cut by 10 percent per year between 2011 and 2013, then tenders would only rise by around 7.5% over the two years, 2012 to 2013, compared with around 9.5% in the central forecast.
Joe Martin, Executive Director of BCIS said: "Despite seeing slightly more positive data coming from the construction sector in recent months with output starting to fall at a slower rate, it is evident that the fall in tender prices will continue.
"It is clear that public finance is having a positive effect on output with recent data demonstrating that new work actually picked up in the second quarter, led by a sharp increase in the contribution from the public sector. As a result any cut in the supply of public money will have a detrimental effect on any recovery. Our forecast indicates that not only would tenders keep falling for longer, but any subsequent recovery would be much slower and it will be several years before we see prices reach pre-recession levels."
Source: https://bcis.co.uk/