TPI Survey Feedback

Workload

The market remains busy and buoyant, with opportunities in most sectors according to those surveyed in our latest TPI survey. Sentiment is largely positive in contrast to the gloomier outlook of past months, with new projects still landing and progressing through RIBA development phases.

Current commercial project commitments are stable with long-term programmes continuing into procurement over 2024 and 2025. RFPs for new projects that commence in the coming months continue to be received in addition to projects that fell into a holding pattern now being considered again.

Despite material and labour costs being at or near all-time highs, there is a continuing interest from clients on new projects to get into contract. At the same time, clients are acutely aware of the current market pressures and if prices continue to rise, appraisals may not be attractive to continue to procurement.

However, there were some more negative perceptions about future workload prospects among survey respondents. A cooling in new starts in residential and housing sector compared to recent years was expected, with large projects finishing new ones are not replacing them. Reasons quoted ranging from town planning delays and negative appraisals to difficulty obtaining funding. A proportion of speculative and live projects may still be cancelled, reducing the number of opportunities towards the end of 2023.

Market Conditions

The perception of market conditions saw little movement in our latest survey. If anything, market activity has stepped up a gear, with a greater proportion noting higher activity and more passive tendering rather than falling activity and more competitive bidding.

The expected drop-off in market activity seems to be pushing out as enquiries and 2023 contractor pipelines look stable. Many are now more concerned about a downturn in 2024.

With the risk that new project opportunities may start to slow towards the end of this year and into 2024, contractors appear keener to tender on more projects due to concerns over longer-term order books. Despite a more competitive attitude towards securing projects, contractors continue to be selective with what they are tendering at present given the strong levels of pre-contract activity in the market.

We anticipate seeing more competitive bidding in the not-too-distant future as new orders and project starts slow down. Early works trades (eg groundworks and demolition) are actively seeking opportunities to tender and have higher levels of available capacity. Later trades such as façades and drylining however, are still declining tenders due to a lack of supply availability and it is likely to take more time for inflationary pressures on these trades to ease.

The recent rise in industry insolvencies is likely to have a growing impact taking supply capacity out of the market. A growing number of contractors have been caught out by rising construction costs and inflexible contracts, especially where prices were fixed before 2022. Consequently, the supply chain is unwilling to accept the risk levels they many have done in the past.

The cost of borrowing and debt financed project funding has increased significantly with clients moving slower, holding back investment plans due to the uncertainty and pressures on appraisals. The supply chain continues to wrestle with variables causing price increases, but after a period of strong activity and excessive inflation, there are clear indications of cooling demand and softening input cost inflation.