BCIS Civil Engineering forecast - March 2023

Despite the headwinds from a stagnating economy, infrastructure demand is expected to hold up in most sub-sectors.

However, there are risks to both demand and delivery as recent cost inflation has eaten into budgets and resource limitations delay projects. Furthermore, global financial conditions, competition for investment and constrained supply chains continue to impact investors’ appetite for UK infrastructure.

While material cost pressures are easing, labour supply difficulties will see costs and prices rising throughout the forecast period (2023-2027).

Civil engineering tender prices in 4Q2022 rose by 2.4% compared with the previous quarter, and by 13.8% on an annual basis. Civil engineering tender prices will rise by 16.2% over the forecast period (4Q2022 to 4Q2027), with infrastructure output remaining at a historically high level.

Output from the infrastructure sector reached unprecedented heights in 2021. However, during 2022 there has been a slowdown in all sectors other than Railways, Harbours, and R+M, which saw some growth. This resulted in a 2.5% fall in total new infrastructure work and a 0.2% rise in infrastructure output overall.

Infrastructure new work output is expected to rise in each year of the forecast and 12% over the next five years.

Civil engineering materials prices rose by 3.6% in 4Q2022 compared with the previous quarter, and by 25.0% compared with a year earlier. The main risks to materials prices are expected to include volatile energy prices, tariffs on imports and sterling exchange rates.

Civil engineering costs rose by 0.5% in 4Q2022 compared with the previous quarter, and by 15.1% compared with a year earlier. Costs are forecast to rise by 10% between 4Q2022 and 4Q2027, with labour replacing materials as the main driver of any growth in costs.

Figure 1: Civil Engineering Tender Prices, Input Costs and New Work Infrastructure Output

(Annual percentage change: Prices and Costs 4Q to 4Q, output whole year on whole year*)

The full details of the forecast are available in the BCIS CapX.

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