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Mace predicts tender price growth amid material price inflation

Mace has reversed its prediction that tender prices would fall in 2021 and now predicts a rise of 1.5% this year, before peaking at 3.5% in 2023.

In its Q2 2021 UK Market View, Mace said the increase in products including steel, timber and concrete had been caused by a lack of supply, while volatility caused by the initial lockdown period, alongside Brexit implication, had impacted tender prices.

After rising until 2023, tender prices are expected to start to ease in line with the economy, coming down to 2.5% in 2024, Mace said.

It said that despite higher material costs, construction output was 2.4% above its February 2020 level, with the industry now in recovery.

But some sectors, such as repair and maintenance and infrastructure, have fared better than others. Private industrial, is down 27%, and private commercial has dropped 10%. As a result, all new work is still lower than 13 months ago.

Steven Mason, managing director for cost consultancy at Mace, said: “The tide of uncertainty that the construction sector and wider UK economy has experienced from the impact of Brexit and covid-19 appears to be finally turning, with global supply problems and resilient levels of demand driving dramatic increases in forecast tender prices.

“While demand in some sectors remains weak, the overall picture and sentiment for construction and infrastructure projects looks increasingly positive. With a risk averse supply chain that is reluctant to absorb the impact of these rising input costs, we anticipate a larger than expected impact on market prices and have adjusted our forecasts for 2021 upwards to reflect this.”

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