Tender prices have risen for the first time in two and a half years, as the price of materials surges.
Tender prices were 0.5 per cent higher in the third quarter of 2010 than in the same period the previous year, according to the Building Cost Information Service of the Royal Institution of Chartered Surveyors.
The rise is the first year-on-year increase since the middle of 2008.
Materials including crushed rock, imported softwood and fabricated steel experienced a steep increase in the quarter. Overall, the price of materials rose by more than 8 per cent in the year.
CN last week (page 6, 3 Feb) revealed that steel price increases would cost the European construction industry €8bn (£6.8bn) in 2011.
A sharp spike in prices is expected, owing to flooded mines in Australia, while increases in global demand are driving a steady upward trend.
Although new work output was 5 per cent higher in Q3 2010 than in the previous quarter, and 22 per cent higher than in Q3 2009, it is expected to fall slightly in 2011 as cuts in public spending take effect.
BCIS information services manager Peter Rumble said: “Despite new work output [being]expected to dip in 2011, it is anticipated that 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 that the majority expect tender prices to remain static over the next six months, while 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.”
Figures from Rics’ Construction Market Survey, published last week, showed that material costs rose dramatically in the final quarter of 2010.
In addition, 56 per cent more surveyors reported a rise in costs, up from 28 per cent in the previous three months.
A decrease in the cost of labour, owing to competition for jobs, failed to make up for the increase in commodity prices. The result was that the total input costs net balance climbed from +9 to +28.