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Construction sector witnesses growth in margins

The index confirmed that tender cost inflation is set to hit 4.5 per cent for the rest of 2015. A more gradual rate of ongoing improvement is also predicted for the following two years with the index suggesting that tender prices will rise at a rate of four per cent, well above the level of general inflation.

A statement from the company read: “With input cost inflation at low levels, it is increasing margins that continues to be the main driver behind any tender price increases, and the demand from a growing economy remains robust enough to generate the current price increases.”

Contractors working in the construction section in London look set to enjoy even greater uplift, with a forecast of 5.5 per cent in the offing for 2015.

What's more, these increases are likely to end up improving the margins enjoyed by contractors, particularly if tender costs continue to increase at a rate above that of materials and other costs.

Chris Goldthorpe, managing director of Mace Cost Consultancy, commented on the market developments in the Capital in particular: “The growth of the construction industry in London is well established and the market is stabilising, although complex or bespoke projects are still attracting a premium.”

He added that the city is witnessing “a similar pattern” to that developing in other regions of the country “where supply chain constraints and risk aversion has led to reduced competition, particularly for major projects, where the choice of procurement method is critical to achieving value for the client”.