Tender price indicator
Our Tender Price Inflation report looks at the movement of prices in tenders for building contracts in the UK. The report examines a number of contributing factors including GDP, sterling, oil price, employment levels, input costs and construction output. This is further informed by our market survey responses and contractor consultations.
Following a relatively weak start to the year, construction output increased by 3.3% in the three months to July 2018, driven by growth in repair and maintenance and all new work.
Our forecast for UK average tender price inflation remains unchanged at 1% for both 2018 and 2019.
However, we have revised down our 2020 UK average tender price annual percentage change from 1.5% to 1%. This is largely a result of lower forecasted growth in the South East and North.
London tender price inflation has been revised up from 0.5% to 1% for 2019 but our London forecasts for 2020-2022 remain unchanged. We have pushed up our regional tender price forecasts for South West, East Anglia, Wales, Scotland and Northern Ireland, with Yorkshire & Humber the only region revised down.
All forecasts assume an orderly Brexit with open market trading conditions.
Our forecasts take account of all sectors and project sizes as a statistical average indicating an overall trend in pricing levels. It should be remembered that individual projects may experience tender pricing above or below the average rate, reflecting the project specific components and conditions.
Despite increased material and labour costs, there were higher levels of construction output in Q2 2018.
UK economic growth picked up in the second quarter of 2018, with GDP seeing quarter on quarter growth of 0.4% (Q1 2018 Q-on-Q growth was 0.1%). The annual rate of GDP growth has been revised down slightly from 1.3% to 1.2%, with UK growth over the first six months of 2018 coming in at its weakest level since 2011. However, there are encouraging signs that activity strengthened at the start of Q3 2018.