Having contended with an overheating market, rampant inflation and strong construction activity growth for much of 2022, the market may be on the verge of a turn. There are signs that the market has peaked and the post-pandemic recovery cycle is entering a new phase – a phase with slowing output and new order growth and a certain degree of demand-destruction.
The IMF predicts that one-third of the global economy will be in recession next year. Even more will feel like they are in a recession. This is in large part due to a combination of the ongoing cost-of-living crisis, Russia’s invasion of Ukraine and the slowdown of growth in China. In Europe, a severe energy crisis has hampered economic activity and fuelled levels of inflation not seen since the early 1980s. Governments have reacted to tame inflation but the risk of monetary, fiscal or financial policy mis-calibration has risen sharply at a time when the world economy remains historically fragile and financial markets are showing signs of stress.
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.