Consultant issues warning on material and labour shortages as it revises tender price forecast again

Construction needs to increase productivity more quickly than it is currently doing, Turner & Townsend said as it revised its tender price forecast up again.

The consultant鈥檚 latest UK Market intelligence report called for firms to adopt digital tools and off-site manufacturing to counteract soaring cost inflation for labour and materials in the years ahead.

The quarterly forecast found tender price rises this year would be 4.5% for commercial work and 4% for infrastructure, up from 3.5% predicted for both sectors in September鈥檚 report.

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Turner & Townsend said firms must adopt modern methods of construction if they want to survive ongoing cost increases

It added that long term forecasts have also stayed at a high level, at 5% as far ahead as 2025.

Costs are expected to continue rising despite a slowdown in the sector during the second half of last year, with the ONS finding a 0.9% drop in output between quarter two and quarter three as construction vacancies soared by 43.3%.

Annual material costs in the year to November also rose by 22.7%, according to government figures.

T&T said the combination of pressures was putting the industry in a 鈥渧ulnerable position with its recovery finely balanced鈥�.

The firm鈥檚 managing director of cost management Martin Sudweeks said the sector鈥檚 recovery last year has 鈥渃ome at an inflationary cost鈥�, adding: 鈥淚f we want to maintain the trends in growth we have seen and continue construction鈥檚 role as the economy鈥檚 powerhouse then we need to enact change, and fast.鈥�

The Insolvency Service found the number of insolvencies in construction rose by 18.6% in the third quarter of last year 鈥� a year-on-year increase of more than 80%.

T&T鈥檚 report said that the sector must now focus on becoming more efficient, warning that unproductive firms 鈥渓imit the sector鈥檚 adaptability and resilience against market unpredictability鈥�.

Sudweeks said the industry鈥檚 adoption of modern methods of construction and digitisation had been 鈥減iecemeal for too long, particularly in digital, despite its potential for transformational change鈥�.

He added: 鈥淐onstruction businesses that embrace the digital tools at their disposal and hold fast to a long-term programmatic approach will be those that should prosper in the months and years to come.鈥�

In its September report, T&T said the cost pressures were being caused by wider issues with the UK economy such as the impact of Brexit, as well as changing consumer behaviour in the wake of repeated lockdowns and the response to climate concerns and its effect on the economy.

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