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Costs fall for second quarter in succession

COSTS - Reinforcement and structural steel both down by over 4 per cent

FOR THE FIRST time since this survey started, contractors' input costs have fallen for two quarters in a row, the marginal fall in the last three months coming after a drop of 2.4 per cent between March and June.

Despite this, input costs are still 3.5 per cent higher than in September 2004, according to the EC Harris/Construction News Cont ractor's Input Cost Index.

The materials showing the largest price falls in the past quarter were reinforcement and structural steel, which dropped by 4.3 per cent and 4.2 per cent respectively. Both are also cheaper than a year ago, with reinforcement down 6 per cent and structural steel down 2.2 per cent.

While the steel producers are still talking about price rises, the crisis and price hikes of 2004 have been mitigated by normal market forces.

Most of the materials in the survey have fallen in the past quarter and, while materials costs are on average just 1.5 per cent down, those figures have only been held up by a 5 per cent rise in brick prices.

Over the past year materials costs have not shown any real movement and are only 0.6 per cent above September 2004.

Labour rates can usually be expected to make up for any slowdown in materials' price rises and, while rates on site are 7.5 per cent higher than a year ago, labour rates across the country have fallen marginally over the past three months.

As usual there are some fairly dramatic regional differences in labour rates.

Site rates in London remain the highest in the country, averaging out at around £166 a day for skilled workers, up 5 per cent on the year. In contrast rates in Wales fell by 8 per cent in the past quarter and, although they are 1 per cent up on a year ago, they remain the cheapest in the country at £115 per day.

In contrast, site rates in the south-west rose by 12.6 per cent over the past year and, at £157 per day are 7 per cent above the national average.

In the Channel Islands, site labour rates rose 5.4 per cent in the past three months, although this comes on the back of a static nine months. Materials prices in the islands rose by less than 1 per cent during the year.

Overall contractors' costs were 3.5 per cent higher than in September 2004.

Overall, prices in the islands are 34 per cent higher than the national average, with labour costs 10 per cent cheaper but materials prices almost 70 per cent higher.

Construction workload slowed 2 per cent during the first quarter of this year compared with the same period in 2004.

But new order figures showed a substantial increase in the second quarter of the year and this will create an increase in construction activity.

The effect of the London Olympics is not likely to be as dramatic as the initial £10 billion figure suggests and the bulk of the Olympic-related construction activity will not kick in until mid-2007. The Games will generate an additional £2 billion of construction spending ? adding 1.5 to 2 per cent per annum to workload in the south-east over the five years to 2012.

But running counter to this rise is the slowdown and completion of some of the larger schemes in the south-east. T5, the West Coast Main Line, CTRL and the Wembley and Arsenal stadia will all be substantially out of the way by 2007. In terms of prices, the expectation is that tenders in London will be bumped up by 1 to 1.5 per cent by the Olympics f rom 2007.