Industry

17 OCT 2018

MATERIALS COSTS EXPECTED TO RISE AS BREXIT FUELS CONTRACTORS' FEARS OF SLOW GROWTH

Expected rises in material costs along with the increased uncertainty that Brexit presents are fuelling contractors’ fears of a subdued market for the next 12 months, according to the latest UK Market Intelligence report from Turner & Townsend.

The consultancy firm found that contractors expect the cost of construction materials to rise by 5.3% in the next year and that more than half of survey respondents feel the market will cool during that time.

Concerns laid out in the report are despite contractors reporting a 23.4% increase in order books for the current financial year while they also indicate that order books for the next financial year are now 17.5% fuller than they were in Q1.

But the upward trend is marginalised due to the fact input costs remain stubbornly high and the company’s price data revealing contractors expect the cost of a representative basket of construction materials to rise by 5.3% in the coming year.

T&T’s latest quarterly report said confidence was fragile in a number of areas - with contractors in London the most nervous - with more than a quarter (26%) of respondents predicting a slow down in growth for the following year.

Paul Connolly, UK managing director of cost management at Turner & Townsend, said: “While there have been some high-profile examples of financial sector giants swapping the City for the Liffey, for now the exodus remains more threat than reality. Clearly it is incorrect to suggest that the interplay between the two cities is a zero-sum game, and that Dublin’s market is heating up in direct inverse proportion to London’s cooling.”

However, the picture over the Irish Sea looks more rosier with Dublin’s construction market said to be in the midst of a “full-scale boom”. Bullish sentiment and strong client demand credited as the catalysts for driving up tender prices at well over double the rate seen in the UK capital.

Surveyed contractors forecast that tender prices in Dublin will rise by an average of 6.3% in 2018, while those in London forecast a modest 2.5% increase. 

The gulf in construction fortunes between the two cities is most stark in terms of market sentiment.  Nearly two thirds (63.6%) of contractors in Dublin report that their market is improving and getting warmer compared to just 21.1% of respondents in London.

Connolly added: “A surge in relocation interest has undoubtedly turbocharged Dublin’s construction market, and it now risks overheating with the city facing the prospect of acute skills shortages and rapid price inflation. While Brexit itself is likely to impact on both sides of the Irish Sea, for now the uncertainty over the nature of the UK departure from the EU is taking a far greater toll in London than in Dublin.”

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