Tender Price Indicator
The UK construction industry continues to grapple with uncertain demand, high construction and financing costs, as well as skilled labour shortages - a potential storm that is increasing financial pressure.
These pressures may pose viability challenges in the immediate future and exacerbate the recent trend of rising construction insolvencies – the effects of which are being increasingly felt up and down the supply chain. Any reduction in capacity could exacerbate the current inflationary pressures and pricing of risk offsetting the reduced demand. While smaller specialist contractors and subcontractors are evidently being hit the hardest, larger main contractors are also not immune. Recent high-profile collapses from the likes of Buckingham Group and M&E specialist contractor Michael J Lonsdale illustrate how financial pressures and their knock-on effects are impacting all.
Given the current pressures acting out in the market, it is unsurprising that new construction activity has softened, especially compared to 2022, which was an exceptionally strong year for UK construction growth. Some projects, driven by development appraisals and debt finance, are finding it difficult to proceed and commit to construction from a viability perspective. However, with interest rates looking like they may have now peaked and materials cost inflation softening, these stalled projects may become unstuck.
All forecasts in this report 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 published average rate, reflecting the project specific components and conditions.