Tender price indicator
Hopes of entering into a period of relative calm and greater market certainty have firmly been put on ice as we find ourselves facing the prospect of a ‘new normal’ in the wake of the coronavirus (COVID-19) pandemic.
Record downgrades to economic growth have left many longing for a time when Brexit was the major risk to contend with. Coronavirus was barely a blip on the radar a few months ago and now, according to former chancellor Philip Hammond, it poses a risk greater to the economy and supply chains than a no-deal Brexit.
The wide range of forecasts estimating the damage the pandemic could do to the UK economy demonstrates just how uncertain the immediate outlook is. The scale ranges from a contraction of 3.6% to GDP in 2020 (J.P. Morgan) all the way down to the most pessimistic forecast by the Office for Budget Responsibility (OBR) – a contraction of 12%. Fortunately, a number of macroeconomic forecasts point to a steep but relatively short-lived contraction that will mostly affect activity in the first half of the year with a partial recovery expected in the second half.
Either way, scenario analysis is often the best technique to use in such an uncertain environment. Businesses need to plan for a range of possible shocks and so this is the approach we have taken with our latest tender price forecasts.
Inflationary and Deflationary Pressures
Based on our observations of the market and our extensive discussions with the supply chain we have established that there are a number of inflationary and deflationary pressures that are likely to impact input costs and tender pricing.
In this section we have outlined three potential scenarios: Good, Neutral and Poor. Each scenario includes a number of events and conditions which, if they materialise, will have varying impacts on tendering conditions.