Input Costs

The majority of indicators for building costs continued to show increases over the 12 months to the end of 2017 with housing materials dominating demand and price rises.

MATERIALS

Mechanical and electrical components were ahead of general building costs at 3.9% and 0.7% respectively in the last quarter. 

Structural steel was down 2% while reinforcement was up by 5.5% and concrete up 1% over the last quarter.

OIL

Fuel oil continued to rise in the quarter with US$70 bbl recorded in January 2018. Increases are being passed on to petrol pump prices, adversely impacting transportation and manufacturing costs for construction.

LABOUR RATES

Construction rates of pay continue to be ahead of average earnings rising 2% in the third quarter of 2017 giving an annualised increase of 3.2%.

UNEMPLOYMENT

The UK unemployment rate rose marginally to 4.4% in the three months to December 2017, taking total employment to just below
the record 32.2 million. Low unemployment reflects a continued demand for UK goods and services with a shift noted in full-time employees over self-employed. 

There is significant disparity across the regions of the UK with the North East (5.4%) and West Midlands (5.6%) having the highest rates of unemployment, and the South East (3%) and South West (3.8%) the lowest.

MARGINS

Returned bids are evidencing stable margins with limited appetite to absorb increased input costs. A slowing demand could influence this but the impact of construction insolvency is likely to add more caution and risk aversion.