Pressure eases on construction sector
PRESSURE on construction companies eased slightly during the third quarter of last year but any hope of sustained recovery is a way off yet, according to the latest UK Tender Price Index.
The index, compiled by the Building Cost Information Service of the Royal Institution of Chartered Surveyors, showed that although tender prices fell for the seventh consecutive quarter in Q3 2009, costs stabilised.
The price of new construction tenders fell a further 0.9% in the third quarter 2009, and now stands 12.2% down on the same time last year. BCIS has predicted it will fall a further 4% through 2010 before returning to growth in 2011.
The General Building Cost Index has remained virtually unchanged in the third quarter rising by only 0.4%.
This followed two quarters of falling costs and over the year costs fell a total of 1%, the first year-on-year fall since the series started in 1978.
RICS said the fall would bring a small amount of relief to construction firms, who were suffering from annual rising costs of 7% a year ago.
In terms of activity, the market is still quite weak which is helping to drive down tender prices. New orders for construction fell by 1% in Q3 and by 3% when compared with the same quarter in 2008.
New work output also continued to fall significantly, recording a drop of 13% when compared with the same period a year ago.
Joe Martin, Executive Director of BCIS, said: “The drop in costs is due to falling material prices and a pay freeze for many construction workers.
“However, falling costs will only bring limited relief as tender prices are expected to continue to fall through to the end of 2010 whilst demand remains weak.”
