’Increased costs will hit just as UK market is slowing down’
The cost of building materials is expected to rise by more than 5% in the coming year at the same time as the UK market is starting to cool down, according to a new report.
Consultant Turner & Townsend (T&T) said that against a background of subdued growth UK contractors had reported a 23 percentage point rise in order books.
But this good news was tempered by the likelihood of input costs rising by 5.3% over the next 12 months.
T&T’s latest quarterly UK Market Intelligence report said confidence was fragile in a number of areas - with contractors in London the most nervous - with more than a quarter (26%) of respondents to its survey expecting the market to cool in the next 12 months.
“The single greatest brake on confidence and to a lesser extent activity in the capital is Brexit uncertainty,” the report added.
But T&T said that while London – which acts as an indicator for other regions – might be slowing down amid Brexit uncertainty, across the Irish Sea Dublin was booming, as firms looked to re-locate there in the event the UK crashes out of the EU without a deal.
Tender prices in the Irish capital are expected to rise by an average 6.3% this year, versus London’s 2.5% increase.
Paul Connolly, T&T’s UK managing director of cost management, said clients operating in challenging markets like London had to face down what he called “multiple, fast-moving threats with equally agile procurement and project management strategies”.
He added: “The most obvious issue to be confronted is supply chain strain. Clients must remain vigilant and in practical terms, this means re-running credit checks and challenging suppliers on their ability to continue delivering, while also seeking to understand and allay their concerns.”