Contract Prices Predicted To Rocket
PRICES of construction contracts could rocket in 2014 as volumes of work and costs grow, says a new report.
There is also a warning of business failures for some contractors who had priced work before costs rose and would therefore be unable to recoup the subsequent rises in labour and materials prices.
This is forecast by Deloitte Real Estate’s UK real estate predictions 2014 report. It expects construction tender prices to increase by at least 3.5% in the next 12 months, and possibly higher if confidence carries on rising and work continues to be there.
The report’s author Neill Morrison, partner in construction cost consultancy at Deloitte Real Estate, is reported saying: ‘Large contracts secured on a lump-sum basis that are just starting now are the ones I would be concerned about.’
He is quoted suggesting that there could be a growth in takeovers of faltering contractors.
Mr Morrison had heard reports of formworkers seeing their pay rise from £130 a day to £170 when moving to a new site. ‘Contractors can’t simply mop up those increases,’ he reportedly said.
He added: ‘We are starting to see contractors pulling out of tenders, picking and choosing the work they bid for and not bidding for work they consider higher risk’.
Another forecast is a tentative return in 2014 of speculative office developments, which all but disappeared during the recession.
This article has been reproduced from the Contract Flooring Journal website. You can find them at www.contractflooringjournal.co.uk.