by Jbs101209 h3 — October 16, 2009—Tender prices for new construction work in the U.K. may not start rising until 2011, and won’t return to pre-recession levels during the forecast period, says the latest five-year forecast from the BCIS, the Royal Institution of Chartered Surveyors’ (RICS) Building Cost Information Service.
Tender prices are predicted to fall 5.2 percent in 2009 and a further 1.8 percent in 2010, before returning to 3.3 percent growth in 2011. Such decreases will be a result of sharp declines in new work output through 2009, with slower falls expected in 2010 before returning to modest growth in 2011.
However, if the recession in housing, industrial, and commercial in the private sector is more drawn out than predicted in the central forecast, with growth not returning until 2012, then the price of new construction work will continue to fall through 2011 at a rate of 1.9 percent, says the report. A cut in public spending would reportedly have a similar effect on tender prices, meaning tenders would suffer around a 15 percent peak to trough fall over a period of four years.
Such cuts would also see the rate of growth in tender prices, once it comes, move more slowly. If public spending in construction were to be cut by 10 percent per year between 2011 and 2013, then tenders would only rise by around 7.5 percent over the two years, 2012 to 2013, compared with around 9.5 percent in the central forecast, says BCIS.
Despite seeing slightly more positive data coming from the construction sector in recent months with output starting to fall at a slower rate, it is evident that the fall in tender prices will continue, asserts BCIS. The forecast shows that public finance is having a positive effect on output with recent data demonstrating that new work actually picked up in the second quarter, led by a sharp increase in the contribution from the public sector.
As a result, any cut in the supply of public money would have a detrimental effect on any recovery, says BCIS. The forecast indicates that not only would tenders keep falling for longer, but any subsequent recovery would be much slower and it would be several years before prices reach pre-recession levels.
