Tender prices increased 0.5 per cent for the third quarter of 2010 compared with the previous year, the first rise for two years.
According to the RICS Building Cost Information Service, the rise is the first increase since the middle of 2008.
The price of materials rose 2 per cent in the same period which equates to a 8.2 per cent rise across the year. Materials including crushed rock, imported softwood and fabricated steel experienced a steep increase in the quarter, although prices are expected to rise in line with inflation over the next two years.
Construction employment in the third quarter of last year saw a 1 per cent fall, with average weekly earnings dropping 0.7 per cent. This was against the background of a 2.2 per cent in the economy as a whole. The BCIS said that wage increases would be “subdued” over the next couple of years.
New work output rose by 5 per cent in Q3 2010 compared with the previous quarter and 22 per cent compared with Q3 2009. It is is expected to fall slightly into 2011 as public spending cuts take effect. Some growth in new work output is expected next year.
Construction orders have been falling for the last four quarters suggesting a slowdown for this year.
BCIS information services manager Peter Rumble said: “Despite new work output expected to dip in 2011, it is anticipated tender prices will be driven by, and move in line with, rises in input costs over the next two years.
“A recent BCIS survey of contractors shows the majority expect tender prices to remain static over the next six months, whilst BCIS anticipates a stagnation in tender prices in the last quarter of 2010 before a slow upward trend returning in 2011. Uncertainty remains for the industry, with it being reliant on the pace of a private sector recovery.”