Five-year forecast of building demand, costs and prices

Tender prices are expected rise by 14% over the next five years (2nd quarter 2020 to 2nd quarter 2025).

This is against a background of stagnant UK GDP growth, which is expected to rise only 3% over the five years 2019 to 2024, with a fall of over 10% in 2020, a bounce back in 2021 and under 3% growth over the remainder of the forecast period.

Construction output will rise 10% over the forecast period, again a sharp fall in 2020 (-18%) will be offset by a bounce back in 2021 (+12%) followed by relatively strong annual growth of between +5% and +7% in 2022 – 2024.

With the end of the Brexit transitional period fast approaching, and a second wave of Covid-19 upon us, tender prices are expected to fall 1.8% in the year to second quarter 2021. Over the second year of the forecast period, tender prices are expected to rise more or less in line with input costs as output bounces back. With demand increasing over the remainder of the forecast period, and with less contractors in the market (liquidations during Covid-19), tender prices are forecast to rise ahead of input costs, by around 4% per annum. Assuming access to European labour returns in the latter part of the forecast period increasing the supply of labour, this may dampen tender price increases, with lower site rates.

New work output, building costs and tender prices