Mace increases tender price forecast in light of persistent UK inflation

Mace, the international consultancy and construction company, has increased its tender price forecast in light of further inflation in the UK.

The ‘Market View Q2’ report explores various factors including positive economic growth in Q1, the rate of material prices continuing to cool – but also the recent news that the UK economy continues to suffer from significant inflation.

The company has increased its 2023 tender price forecast from 2.5% to 3.0% in London and 3.5% elsewhere, with the forecasts for the following two years also nudged upward.

The report goes on to consider how tightness in the labour market has led to regular pay in the construction industry reaccelerating, rising 1.8% in Q1 – up 6.2% compared to a year ago.

It also outlines that, while construction output rose in Q1, this was due to the repair and maintenance sector with all new work declining 1.9%.

The report highlights that housing is one sector clearly struggling, both with ongoing work and new orders, and if interest rates rise as high as some are now suggesting, the sector is likely to endure even more dire conditions.

Andy Beard, Global Head of Cost and Commercial Management at Mace, said:

“Despite the news about inflation, we are in a much more hopeful position than we were a quarter ago. The economy has held up better than seemed likely at the start of the year, and prices have reacted accordingly.

“Notably, pay in construction is currently going from strength to strength, leaving us with little option but to increase tender prices for this year.

“Recent suggestions that interest rates could rise as high as 5.5% need careful watching. With the economy still incredibly fragile, such a shift could trigger a recession.