Construction Input Costs To See Yearly Rise of 4% Until 2020

According to forecasts from the Building Cost Information Service (BCIS), construction input costs are set to rise by 3-4% per year over the next 5 years. Whilst materials and wages are set to increase at a rate of 3-4% annually, the growth of overall input costs will be primarily driven by annual tender price rises of 5-6% until 2020.

In fact, according to the latest BCIS data, tender prices of Q2 2015 exceeded those of the previous quarter by 1.1%, and Q2 2014 by 4.7%. Though at a slower rate, this trend is also set to continue over the next 6 months.

Speaking on the tender price rises, Peter Rumble, BCIS head of forecasting, claimed prices were “forecast to rise by 5.5 per cent in the year to Q3 2016”, with an expected average annual growth rate of “between 5 per cent and 6 per cent” over the five-year forecast period.

Not all prices are following the same trend however: compared to Q1 2015, materials prices experienced a fall of 0.4% in the following quarter. There was also a fall of 0.8% in comparison to Q2 2015, supporting data from the Department for Business, Innovation and Skills. According to this data, it was suggested that September 2015 would see the inflation of materials costs slow to its lowest rate since May 2011.

Whilst the BCIS reports that Q2 2015’s fall in materials prices was the third consecutive quarterly decline, it is expected that materials costs will experience a sharp rise in the medium term. There is also an expectation that materials prices will increase by around 4% per year until 2020, with wages also forecast to experience a 3-4% rise per year over the same period.

Offering further thoughts on the impacts of these predictions, Peter Rumble claims the “UK construction industry continues to show signs of growth, and this is reflected in the BCIS forecast which shows strong increases in new work output.

“While this growth will slow a little over the next four years, it will still maintain momentum with resurgence to a high 5 per cent growth rate in 2020.”

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