Inflation set to diverge across sectors, adds consultant 

Tender prices for construction will be slightly lower than previously expected in 2023 but will diverge substantially across sectors and project types, according to Gardiner & Theobald.

The consultant is forecasting tender price inflation of 2.75% for the year, slightly down from the 3% it predicted at the end of last year.

But it is now predicting tender price inflation will remain higher for longer, continuing at 2.5% until 2026, where previous estimates had it coming down to 2.25% by 2025.

Earlier this week, Mace said it was revising its tender price forecast for the year ahead as falling materials costs and an impending recession blunt hikes.

The firm had previously send prices would jump 3.5% this year, down on previous estimates, and in its latest report for the final quarter of 2022, it said this had been revised down again to 2.5%.

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Tender price inflation is set to be higher in more resilient sectors such as infrastructure

G&T鈥檚 report suggested there were 鈥渃ompelling signs that headline inflation has finally peaked鈥� but warned that it remained 鈥渇ar from certain that underlying inflationary pressures will be stamped out this year鈥�.

With various material price increases penned in for the new year, G&T forecasts that the profile of tender price inflation will begin high in 2023 but subsequently reduce as the year goes on and recessionary pressures are felt.

The consultant anticipates a 鈥渢wo-speed inflationary picture鈥� with those affected most by recession likely to see some discounting by main contractors to secure pipeline, while more resilient sectors 鈥� which include infrastructure, industrial and London commercial fit out 鈥� will see higher rates.

While new project enquiries are slowing, G&T reported that workloads are set to remain strong, centring around masterplan works, public sector schemes and opportunities for expansions of current projects, as well as a handful of other sectors where demand is outstripping supply, including senior living, high-end residential and warehousing and logistics.

Regionally, the South-west is predicted to experience the highest rate of tender price inflation at 3.5%, and the North-west the lowest at just 2%.

 

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