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The EC Harris/Construction News Contractors' Input Cost Index

ECONOMY

WHILE steel and reinforcement prices have continued to rise at a rate well above inflation, the big double-digit increases that were in evidence in the first six months of this year have now disappeared and as a result contractors' input costs in the UK rose by 'only'3.8 per cent over the past quarter.

The year-on-year increase of 14 per cent in the 12 months to December 2004 remains high, primarily because of the rises in the first half of the year, according to the EC Harris/Construction News Contractor's Input Cost Index.

In broad terms, prices of materials increased by approximately 3.2 per cent over the quarter - 16.5 per cent over the past year - while rates for skilled site labour rose by 4.6 per cent over the past three months and by 10.6 per cent since December 2003.

Key materials price rises over the past quarter were those for structural steelwork, which increased by 6.5 per cent, and reinforcement, which rose by 2.7 per cent.

Despite the slowdown, the year-on-year increase for rebar was 45 per cent, while structural steelwork rose by 26 per cent over the same period. Further increases in steel prices are likely in the New Year but it would appear that, after early 2004, prices have to an extent stabilised.

Some experts predict that the US market for steel was starting to slip, while the Chinese government's attempt to cool the economy has also had a negative impact on construction demand.

Meanwhile, in mainland Europe, the building industry has entered the slower winter phase, which again could affect demand for steel.

Labour rates across the country, which showed a lull during the third quarter, have picked up over the last quarter of the year.This time around it was the turn of the northern regions to show large increases, with rates in Scotland up by 24 per cent over the past year, while Yorkshire and Humberside increased by 14.5 per cent and the Northern region by 12.4 per cent.

By contrast, rates in London rose by just 7.2 per cent over the past year, although 5.4 per cent of that rise occurred during the past three months.Despite these differences in year-on-year rises, rates in London still remain the highest in the country, with skilled tradesmen on £166 per day, compared with approximately £142 per day in Scotland and just £112 per day in Wales, which remains the cheapest part of the UK - some 20 per cent below the national mean.

Other than steel, the only other key material that is showing any kind of real price increase is brick, prices of which have increased by 3 per cent over the past quarter and by 8 per cent over the past year.

Prices of concrete, blocks and timber have been more restrained with increases of around 3 per cent over the past year.

As with previous studies, the national figures cover a wide disparity in prices around the UK.Wales is the cheapest place to build and has the lowest prices for bricks and blocks to go with the lowest labour rates.

Contrarily Wales has the highest prices for structural steelwork, with costs some 10 per cent above the national mean. Prices in Northern Ireland, which for years were the cheapest in the UK, recovered some time ago and are now 7 per cent below the national average.

But concrete prices, which are 25 per cent cheaper in the province, and block prices, which are around 40 per cent cheaper, have made a substantial difference to overall costing levels despite the highest rates paid for reinforcement in the UK.

Prices in London remain the highest overall, although the current 10 per cent premium being paid by contractors in the capital has come down considerably from some of the premiums payable in the past.

Costs in the Channel Islands, which increased by 4 per cent during the third quarter of the year, slowed considerably during the past quarter with no measurable movement in this period, although previous increases have meant prices are up by 8.6 per cent since December, 2003.

Nevertheless, the high prices for concrete products mean that rates on the islands remain some 33 per cent higher than the rest of the UK.