Tender Price Indicator
The construction sector bucked the broader economic trend in the latter half of 2022, expanding when other core sectors of the economy contracted. As the stand out sector, strong output growth in 2022 provided the industry with a buffer of workload and laid a solid foundation for the industry to enter an economic slowdown.
Reassuringly, some key sources of construction cost inflation are set to ease or fall back in the coming months. This is welcome news as we enter what is expected to be the second global recession in less than three years. Economic headwinds and projected reductions in workloads will act to partly offset some prevailing inflationary pressures, but this easing of inflationary pressure will likely be accompanied by a greater degree of caution for some as they navigate an increasingly challenging market. However, with certain sectors and project types being more exposed to recessionary conditions than others, a two-speed, forward inflationary picture may evolve as we move through the year.
There are compelling signs that headline inflation has finally peaked and, as with the broader or macro inflationary trend, 2022 could prove to be the high-water mark for construction tender price inflation. Still, little downward construction cost movement is expected in 2023. Instead, the consensus across much of the supply chain is for a ‘levelling off’ in the rate of tender price inflation rather than any overall downward movements this year.
Our Tender Price Inflation report looks at the movement of prices in tenders for construction contracts in the UK. The report examines a number of contributing factors and is further informed by our market survey responses and contractor consultations. This forward forecast illustrates our view of annual tender price inflation from January to December 2023 and beyond.