Q3 2022

TPI Survey Feedback


Responses to our Q3 TPI survey indicated an overall expectation that workloads will remain buoyant for the next six months, but there are growing concerns that some projects could pause and order books shrink as suppliers struggle to provide cost and programme certainty to clients.

Most reported a steady flow of projects were coming online and that there were opportunities on the horizon for work across most sectors. Strong enquiry levels and requests for proposals (RFPs) are boosting potential workload growth.

However, positive momentum from 2021 has not carried through to 2022 for all sectors. While survey respondents pinpointed the commercial, life sciences, senior living and industrial sectors as being particularly ‘hot’ with high activity levels, they highlighted only a limited number of new opportunities in the hospitality sector (both in terms of new development and refurbishment projects). Some sectors, such as the private residential sector, are very exposed to the cost-of-living crisis and slowing economic growth and a number of respondents expected subdued workload growth in these sectors over the short-medium term.

Respondents also noted that while very few clients are slowing on live committed projects, they are increasingly cautious about 2023 due to the risk of potential recession. Clients are taking longer to determine and assess affordability following tender reports and contractors are increasingly having to chase up on previous quotes/tenders that have been provided. So, while site activity is currently high, decision-making and progress on potential pipeline projects is slowing.

The strong inflationary environment has seen the viability of some projects negatively affected, resulting in the revisitation of appraisals by clients. It is inevitable that some projects will not be viable amid rising construction costs and there is a risk that this could cool the market as clients once again adopt a ‘wait and see’ approach. However, questions over affordability and the inflationary environment are not the only headwinds the construction sector is facing. Respondents noted a number of schemes were being held up due to planning constraints and sustainable design factor which is slowing down project progress.

For the time being at least, there is still a good number of tendering opportunities, but if market conditions were to stabilise, even more projects would likely to proceed from feasibility into design.

Market Conditions

While the future growth prospects of the construction sector may have reduced in recent months, the sector has strong momentum behind it which means activity will remain relatively high throughout the rest of 2022. Demand is expected to remain positive into the second half of the year but with worsening economic prospects there is a greater risk of a slowdown in activity and project starts. Any lull in activity could create gaps in contractor order books and promote more competitive tendering as contractors seek to fill these.

While there are some early indicators that construction’s positive growth dynamics are beginning to subside (eg a slowing rate of new order growth, increased client hesitancy and difficulty getting into contract etc), this does not mean prices will fall in the near future. Fewer bidding opportunities may encourage more competition with on-costs and risk allowances (as well as greater flexibility on preferred procurement routes), but contractors are unlikely to absorb the ongoing inflationary increases we are seeing in relation to material/commodity prices and labour costs.

There is a clear mix of views in the market currently, with some expecting a temporary lull or inflationary-driven pause in tendering activity while clients ensure their projects are sufficiently engineered, designed, resourced and funded before procurement. Those that sit in this camp are sceptical whether inflationary pressures will continue and suggest price rises are beginning to plateau. Others expect, and indeed are seeing, clients push ahead out of fear that matters will not improve and inflation will only escalate further as a heated market keeps prices high and supply low.

For now, the market remains busy, and demand is relatively high. Post-pandemic investment (particularly in office projects) is sustaining contractors’ workload. According to our latest Main Contractors Survey, most contractors have secured more than 90% of their workloads for this year and many have secured in excess of 70% of their 2023 workload capacity. While contractors are still willing to tender for projects, some are declining due to high workloads and adopting more selective attitudes towards risk. This is creating some issues on new projects being put out to tender as they are not receiving adequate responses, resulting in delays on contractor appointments.