BCIS: civils tender prices to rise faster than costs

According to the BCIS, civil engineering costs will rise by 14% over the next five years to the first quarter of 2029, while tender prices will increase by 22%.

New work infrastructure output rose by 4% in 2023 but growth is expected to decline by 1.4% in 2024, before recovering from 2025. Output in this sector is forecast to rise by 16% over the next five years, driven by strong growth in the electricity sub-sector.

BCIS chief economist David Crosthwaite said: “Despite an anticipated decline in output in 2024 as some funding rounds in regulated sub-sectors enter their final stages, there is a strong pipeline of infrastructure work. Output growth is likely to be driven by work to enhance the UK’s electricity distribution network and water companies mobilising their biggest ever capital investment programmes.

“The biggest threat to the sector is ensuring there is capacity to deliver. In publishing the National Infrastructure and Construction Pipeline earlier this year, the Infrastructure & Projects Authority estimated an annual average of 543,000 to 600,000 workers are required to deliver planned investment over the next two years. With widely reported skills shortages, it’s going to be a massive challenge for the next government to ensure the necessary workforce is available.”

On the input costs side, labour costs have continued to rise above inflation. However, as the majority of recently agreed wage awards have been more in line with inflation, the pace of growth in the index is expected to slow. The index is forecast to rise by 18% over the five-year period.

Civil engineering materials’ cost inflation continues to moderate, down from an annual peak of 30.6% in Q2 2022. Over the first quarter of 2024, the highest annual increases have been seen in ready-mixed concrete, cast and spun iron products, bricks and clay products, and gas oil fuel. Steel indices continue to record annual falls. BCIS forecasts minor growth in 2024, with a 14% increase between Q1 2024 and Q1 2029.

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