News Archive
Growth expected ‘til 2010 despite looming inflation
Released on 07/05/2008
The price of new construction work in the UK rose sharply in the fourth quarter of 2007 with tenders rising well ahead of general inflation, according to surveyors.
The latest Tender Price Index compiled by Building Cost Information Service, part of the Royal Institute of Chartered Surveyors (RICS), says, however, that despite strong growth in new work output last year, the growth rate is expected to slow in 2008, partially as a result of the recent credit crunch.
Some investors are delaying or cancelling schemes that were in the pipeline, but the report says there should be sufficient work in 2008 to keep growth above trend.
New work output is likely to grow a little faster than trend in 2008, rising more steeply in 2009, before slowing to a little behind trend in 2010.
2009’s rate of new work output growth will rise mainly as a result of strong growth in public sector funded schemes, particularly in the infrastructure and public non housing sectors.
With public sector growth slowing in 2010, total new work output growth is also expected to slow down.
Peter Rumble, BCIS Information Services Manager said: “Despite contractors being a little nervous about the level of workload in Quarter 1 this year, tender prices are likely to rise on the back of strong new work output growth in 2007 as a whole, and the expected above trend growth through 2008.
“Tender price rises are expected to continue to significantly outstrip general inflation over each year of the forecast period, as a result of above trend increases in new work output and pressure from input cost rises.”
The forecast is based on the timely release of public funds.
Meanwhile, high oil prices could push building costs up even higher around the world, with benchmark US light crude passing the US$122 mark for the first time on Tuesday.
One analyst, Goldman Sachs energy strategist Argun Murti, captured headlines with his warning that the price of crude oil could soar to $200 a barrel in as little as six months as supply struggles to meet demand.
Oil prices have now risen 25% in the last four months and by 400% from 2001.
Demand is led by economic expansion in China and India, while production is down in some exporting countries such as Nigeria and Iraq due to military unrest.
BCIS (Building Cost Information Service) publishes information on the capital cost of new and refurbished work collected from Chartered Quantity Surveyors and others working in the building industry.
