The Building Cost Information Service (BCIS) Has released their latest forecast, detailing rises in both costs and tender
Costs for civil engineering are forecast to rise by 17% over the next five years to Quarter 3 2029, and civil engineering tender prices are forecast to rise by 19% in the same period.
New work infrastructure output is also expected to have seen a 8.9% decline in 2024.
Growth is also expected in the BCIS infrastructure forecast
Despite a decline last year, new work infrastructure output is also expected to recover quickly and grow by 18% in the next five years, specifically due to growth in the electricity sub-sector.
The BCIS infrastructure forecast is produced covering projected input costs, tender prices, and output, and is calculated through the lens of construction market trends, and is intended to inform the market on what to expect for the year.
The All-in Tender Price Index measured the trend of contractors’ pricing levels in accepted tenders, recording a growth of 2.3% in Q4 2024.
In terms of input costs the main driver is labour, with an annual growth in the cost index predicting a slowing to 5.3% in Q4 2024.
National Insurance contributions increased, and the National Living Wage is predicted to impact labour costs, with an increase of 2.5% predicted in April-March, and an overall increase to the BCIS Labour Cost Index of 19% predicted up to Q42029.
Materials cost inflation has been gradually slowing ever since its peak in 2022, with an annual growth in the Materials Cost Index in the negatives from Q3 2023 to Q2 2024. Therefore, the index is expected to grow by 15% to Q3 2029.
Overall output figures have remained low, with the recorded data to Q3 2024 decreasing by 4.1% compared to Q3 2023.
“We do expect to see housing output increase”
Dr David Crosthwaite, chief economist at BCIS, said: “Industry sentiment data continues to present positive readings, although since the Autumn Budget these are now less optimistic than at the time of our previous forecast in September, when the headline S&P Global UK Construction Purchasing Managers’ Index reached a 29-month high.
“We’re predicting that prices will grow more slowly than input costs in 2025 and that this trend will reverse from 2026.
“Given the continuing tightening of the supply side, the long-term loss of employment in the construction labour force, prevailing shortages of skilled labour and an expected uptick in demand this year, the risks to this forecast remain on the upside.
“We’re expecting new work to have contracted by 4.7% overall in 2024 as a result of declines in most sectors. We’re forecasting a return to growth from 2025, with recovery fuelled by housing and infrastructure spending.
“Although the government’s ambitious targets for housebuilding may remain simply an ambition at the volumes they’re aiming for – to achieve 370,000 homes annually, annual construction output for housing would need to see a 68% increase on 2023 levels – we do expect to see housing output increase.
“However, the state of the public finances puts much public spending at risk and the sluggish economy will likely dampen growth in both industrial and commercial sectors.
“It’s unfortunate that the second phase of the government’s Spending Review has been put back to June as many funding and viability decisions are reliant on a transparent pipeline of work and long-term commitment to a growth strategy.”
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