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Tender price slowdown puts pressure on contractors

Tender price inflation should slow down next year to 4.5 per cent according to new research, putting further pressure on contractors’ margins.

The research from consultancy Gardiner and Theobald shows that regionally the north west is hardest hit, with inflation falling from 5 per cent this year to 4 per cent in 2009. Tender price inflation will not start to rise again across the country until 2011.

G&T partner Gavin Mugatroyd said: ‘We are seeing less demand but increases in input costs which means contractors will need to cut margins to win work.

‘What we aren’t seeing is a cut-throat approach to winning work – people are being cautious about what they are going for.

‘We also saw a much greater reluctance than normal from companies about forecasting beyond 2009 – they clearly feel the market is volatile.’

Only Northern Ireland is bucking the trend with inflation rising from 5 per cent to 6 per cent in the province on the back of huge inward investment, including £20 billion to be spent on schools, hospitals, roads, social housing and water/waste in the next 10 years.

The research highlights opportunities for contractors elsewhere in the UK because of the shortage of capacity in the local industry.