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Business sentiment remains subdued as political and economic uncertainty weighs on confidence. Many business sentiment indicators underscore the prevailing uncertainty at regional, national and international levels, all pointing to flatter or slightly weaker expectations of current and near-term economic activity. Ongoing tension from slower global market conditions and trade, weaker investment intentions and international macroeconomic disagreements all contribute to the sense of drift. 

Confidence remains negative on headline measures, with sales growth slowing and a subdued profit outlook. Investment plans are muted, reflecting a backdrop of uncertainty. Spare capacity is also emerging or already available. The surveys also confirm anecdotal information and trends reported by the Office for National Statistics (ONS) and the Bank of England in respect of GDP growth. Without stockpiling at the end of 2018 and early 2019 by firms across the UK in preparation for a 鈥榥o deal鈥� Brexit in March, GDP growth would have been notably weaker. Latest GDP data confirms this dynamic. 

Construction all work output recorded some reasonable growth at 2.9% on a yearly change basis in Q1 2019. According to the ONS鈥� latest data, new work and repair and maintenance classifications saw increases in output. However, this growth measure in Q1 only reverses a variable set of year-on-year change rates through 2018, where no definitive trend was evident. The most recent data indicates that still-respectable levels of overall workload and the nominal levels of total new work posted in the latter half of 2018 will make this year feel comfortably busy, combined with existing workload momentum.

Demand for labour and staff resources eased at the start of 2019. Available capacity corresponds with a trend of softening workloads. However, wages for site trades increased on a yearly change basis, which is consistent with acceptable levels of overall workload and demand for site labour. 

Sterling seems unable to gain any traction and strengthen against its major currency pairs 鈥� principally the US dollar and Euro. Although there have been some shorter-term increases since the beginning of 2019, most of these have been reversed quickly, often responding to political events rather than economic happenings. As sterling extends the period of weakness against major currencies, the ongoing commercial pressure from imported inflationary trends are set to remain. 

Aecom鈥檚 composite index for building costs 鈥� comprised of materials and labour inputs 鈥� continued to rise at Q1 2019. The yearly change at Q4 2018 was 4.1% and, although elevated, marks a slowdown in the rate of change experienced through 2018. The yearly rate of change for input costs is expected to stay firmly positive in 2019, most likely remaining on parity with or marginally higher overall than output prices in 2019. These dynamics will maintain commercial pressure across the supply chain. 

Figure 2: Tender price inflation, Aecom Tender Price Index, 2015 = 100

					Forecast
Quarter	2015	2016	2017	2018	2019	2020	2021
1	96.0	105.8	110.9	113.2	118.3	121.2	123.4
2	98.6	107.7	111.3	113.6	118.9	121.6	123.9
3	101.5	108.7	112.2	115.4	119.6	122.2	124.5
4	103.8	109.9	112.6	117.3	120.6	123.0	125.3

Tender prices increased by 4.5% over the year to Q1 2019. The continuing trend of rising prices is reflective of the overall workload still evident. The supply chain has a balancing act to contend with though: there is enough available work not to cut prices too much, but there is not enough potential work to push up prices notably. Downside risks are linked to a disorderly Brexit process. Alternative outcomes resulting from a 鈥渟ofter鈥� Brexit arrangement 鈥� or no Brexit at all 鈥� would generate positive risks. A synchronised upturn in activity might follow when projects on hold due to uncertainty would all commence at the same time, providing a fillip to workload and taking up available capacity quickly. This might offset some of the larger prevailing headwinds emanating from global macroeconomic trends. 

Aecom鈥檚 baseline forecasts for tender price inflation are 2.3% from Q2 2019 to Q2 2020, and 1.9% from Q2 2020 to Q2 2021. Assumptions underpinning the forecasts include construction industry output reverting to a long-run average without excessive volatility, elevated input costs as a result of weak sterling and some ongoing resource constraints, particularly around site labour. Downside skew to the assessed risks accompanying the price forecasts results from sustained economic and political uncertainty.

Figure 3: Indicative cost ranges based on gross internal floor area

Type	Base index 100 (拢/m2)	Notes
Frames
Steel frame to low-rise building	100-121	Steelwork design based on 55kg/m2
Steel frame to high-rise building	168-190	Steelwork design based on 90kg/m2
Complex steel frame	190-225	Steelwork design based on 110kg/m2
Floors
Composite floors, metal decking and lightweight concrete topping	61-94	Two-way spanning deck, typical 3m span, with concrete topping up to 150mm
Precast concrete composite floor with concrete topping	100-141	Hollowcore precast concrete planks with structural concrete topping spanning between primary steel beams
Fire protection
Fire protection to steel columns and beams (60 minutes鈥� resistance)	14-20	Factory-applied intumescent coating
Fire protection to steel columns and beams (90 minutes鈥� resistance)	16-29	Factory-applied intumescent coating
Portal frames
Large-span single-storey building with low eaves (6-8m)	75-97	Steelwork design based on 35kg/m2
Large-span single-storey building with high eaves (10-13m)	85-117	Steelwork design based on 45kg/m2

Figure 4: BCIS location factors, as at Q2 2019 (*Aecom Index)

Location	BCIS Index	Location	BCIS Index
Central London	125	Nottingham	106
Manchester	100	Glasgow	92
Birmingham	96	Newcastle	92
Liverpool	95	Cardiff	85
Leeds	90	Dublin	96*

Cost comparison updates 

This quarter鈥檚 Costing Steelwork provides an update of the five previously featured cost comparisons covering: offices, education, industrial, retail and mixed-use

These five projects were originally part of the Target Zero study conducted by a consortium of organisations including Tata Steel, Aecom, SCI, Cyril Sweett and the BCSA in 2010 to provide guidance on the design and construction of sustainable, low- and zero-carbon buildings in the UK. The cost models for these five projects have been reviewed and updated as part of the Costing Steelwork series. The latest cost models as of Q2 2019 are presented here. 

Costing steelwork: offices update 

Below is an update to the offices cost comparison originally published in the Costing Steelwork Offices feature in 好色先生TV magazine in April 2017.

One Kingdom Street, London, key features

• 10 storeys, with two levels of basement
• Typical clear spans of 12m x 10.5m 
• Three cores 鈥� one main core with open atrium, scenic atrium bridges and lifts
• Plant at roof level

Cost comparison 

Two structural options for the office building were assessed (as shown in figure 5): 

• Base case 鈥� a steel frame, comprising fabricated cellular steel beams supporting a lightweight concrete slab on a profiled steel deck
• Option 1 鈥� 350mm-thick post-tensioned concrete flat slab with a 650mm x 1,050mm perimeter beam.

The full building cost plans for each structural option have been reviewed and updated to provide current costs at Q2 2019. There has been no real cost movement from Q1 2019. The costs, which include preliminaries, overheads, profit and a contingency, are summarised in figure 5. 

The cost of the steel composite solution is 7% lower than that for the post-tensioned concrete flat slab alternative for the frame and upper floors, and 5% lower on a total-building basis.

Figure 5: Key costs 拢/m² (GIFA), for City of London office building

Elements	Steel composite	Post-tensioned concrete flat slab
Substructure	88	93
Frame and upper floors	435	469
Total building	2,618	2,759

Costing steelwork: industrial update

Below is an update to the industrial cost comparison originally published in the Costing Steelwork Industrial feature in 好色先生TV magazine in October 2017.

Distribution warehouse in ProLogis Park, Stoke-on-Trent, key features

• Warehouse: four-span, steel portal frame, with a net internal floor area of 34,000m²
• Office: 1,400m², two-storey office wing with a braced steel frame with columns

Cost comparison 

Three frame options were considered:

• Base option 鈥� a steel portal frame with a simple roof solution
• Option 1 鈥� a hybrid option: precast concrete column and glulam beams with timber rafters
• Option 2 鈥� a steel portal frame with a northlight roof solution.

The full building cost plans for each option have been updated to provide costs at Q2 2019. The steel portal frame provides optimum build value at 拢682/m²; glulam is least cost-efficient. This is primarily due to the cost premium for the structural members necessary to provide the required spans, which are otherwise efficiently catered for in the steelwork solution. With a hybrid, the elements are from different suppliers, which raises the cost. The northlights option is directly comparable with the portal frame in relation to the warehouse and office frame. The variance is in the roof framing as the northlights need more. Other additional costs relate to the glazing of the northlights.

Figure 7: Key costs 拢/m² (GIFA), for Stoke-on-Trent distribution warehouse

Elements	Steel portal frame	Glulam beams + purlins + concrete columns	Steel portal frame + north-lights
Warehouse	70	141	83
Office	128	170	128
Total frame	74	142	86
Total building	682	763	732

Costing steelwork: mixed-use update

Below is an update to the mixed-use cost comparison originally published in the Costing Steelwork mixed-use focus feature in 好色先生TV magazine in April 2018.

Holiday Inn tower, MediaCityUK, Manchester

• 17-storey tower 
• 7,153m² of open-plan office space on five floors (floors two to six)
• 9,265m² of hotel space on eight floors (floors eight to 15)

The gross internal floor area of the building is 18,625m². The 67m-high building is rectilinear with approximate dimensions of 74m x 15.3m.

Cost comparison 

Three frame options were considered to establish the optimum solution for the building:

• Base option 鈥� steel frame with Slimdek floors
• Option 1 鈥� concrete flat slab
• Option 2 鈥� composite deck on cellular beams (offices) and UCs used as beams (hotel).

The full building cost plans for each option have been updated to provide costs at Q2 2019. The steel frame with composite deck continues to provide the optimum build value with the overall building cost at 拢2,563/m².

Options 1 and 2 are arguably more typical for this building type. The base case structure is an unusual solution due to a decision to change the residential accommodation to office floors at a very late stage; time constraints precluded redesign of the tower block and hence the original Slimdek design was constructed.

Figure 9: Key costs 拢/m² (GIFA), for hotel/office building in Manchester

Elements	Steel frane with Slimdek	Concrete flat slab	Composite deck on cellular beams (offices) and UCs used as beams (hotel)
Structural unit cost	510	426	349
Total building unit cost	2,770	2,667	2,563