The latest AtkinsRéalis tender price inflation forecast predicts borrowing costs to remain high amidst uncertainty.
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The latest AtkinsRéalis report predicts tough but optimistic times for UK construction
The AtkinsRéalis tender price inflation forecast highlights contradictions between the government’s push for housing, infrastructure, and energy projects and labour shortages, rising costs, and supply chain fragility.
The report tells of tough times for the construction industry
The state of the UK economy is fragile, the report states, with an increase in productivity not making up for structural weaknesses in private sector investment and high interest rates.
The report predicts that GDP growth will hit a peak in early 2025 before slowing, with inflation and borrowing costs remaining high.
Infrastructure, including transport, energy, education, and health, will see investment as the government pushes to invest £100bn into infrastructure over the next five years. This is expected to encourage growth in the construction sector, but this could be curbed by the aforementioned inflation and high interest rates.
Other issues mentioned in the report to cause concern are the ambitious nature of the government’s 1.5m homes target, the decline of 350,000 workers since 2019, 30% of workers being over 50 years old, the slow adoption of MMC methods such as modular and offsite construction, the high rates of specialist subcontractor insolvencies (over 60% of all industry insolvencies), and the demand for sustainable construction skills.
AtkinsRéalis tender price inflation forecast predicts a slow growth for the industry over the next few years
In 2025, it is predicted that the UK will see a national growth of 3.50%, increasing to 4% in 2026, and 4.25% in 2027 and 2028.
James Butler, managing director for project and programme services at AtkinsRéalis, said: “The construction sector is the engine for driving the government’s growth agenda, but the quarterly flux in TPI demonstrates how exposed this sector is to short term economic impacts.
“As such, it is vital that recent commitments from government to get Britain building, evolve into concrete programmes that will give industry the confidence to invest in the technology and skills needed to deliver on the growth agenda.”
Max Wilkes, market intelligence lead at AtkinsRéalis, said: “Against a backdrop of contractors maintaining a risk-averse approach to tendering, the additional tendering opportunities as a result of the government’s push for growth will be welcomed, albeit carefully scrutinised.
“But while there are currently pressures on costs stemming from November’s Autumn Statement, in our view it would be a mistake to make cuts in areas such as skills training and technology, which is typically what happens in a tight situation.
“This would lead to higher costs, delays, and less appetite for developers to invest in property and infrastructure. Indeed, it is the increased adoption of technology and digital tools that will create the efficiencies necessary to offset the increased costs as a result of a higher TPI.”
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