Our view on pricing

The UK construction market finds itself at an interesting point in time. The enthusiasm seen at the beginning of the year has been disrupted by international conflict in the Middle East, dampening both economic growth expectations as well as confidence among businesses and consumers. Despite these headwinds, there has been positive progress that demonstrates resilience and opportunity within the market. Long-term commitment to building and improving the nation’s assets and major programmes continue to move ahead, and both developers and occupiers continue to creatively challenge viability constraints.

However, the overall market is still not moving forward confidently as project teams navigate economic and investment uncertainty, increasing input costs, strained contracting markets and high regulatory costs. Demand for construction work has been low, which in turn has helped keep overall inflation in check, whilst evidence suggests that if demand recovers, prices could be put under pressure.

At the beginning of the year, there were reasons to be more positive about the construction market; interest rates were falling, and confidence seemed to be on the cusp of a turnaround due to improving viability. However, developments since the end of February mean that project teams may need to work harder to manage viability and the overall impact on the construction market will be driven by the timeline to a resolution.

Due to the evolving situation in the Middle East, we have maintained our existing view of Tender Price Inflation. We will continue to carefully monitor and assess the market, since price increases are not always transferred directly or immediately, and the length of the conflict plays a significant role in this.

Our forecasts are representative for the UK as a whole and inflation may vary by project size, value, procurement route and region. Projects need to be assessed on an individual basis and may not always align to our central scenarios. For further assistance on cost assurance and inflation analysis in your area, please contact Turner & Townsend.