Previewpdf
Previewpdf
Architects’
and Builders’
Price Book
2024
Spon’s
Architects’
and Builders’
Price Book
Edited by
2024
One hundred and forty-ninth edition
First edition 1873
One hundred and forty-ninth edition published 2024
by CRC Press
4 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN
and by CRC Press
Taylor & Francis, 6000 Broken Sound Parkway, NW, Suite 300, Boca Raton, FL 33487
CRC Press is an imprint of the Taylor & Francis Group, an informa business
© 2024 Taylor & Francis
The right of AECOM Professional Services LLP to be identified as the Author of this Work has been asserted
by them in accordance with the Copyright, Designs and Patents Act 1988
All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any
electronic, mechanical, or other means, now known or hereafter invented, including photocopying and
recording, or in any information storage or retrieval system, without permission in writing from the publishers.
Spon's Price Book data is for guidance only and the publisher shall not be liable for any losses (commercial or
otherwise) resulting from the use of the data under any circumstances.
For permission to photocopy or use material electronically from this work, access www.copyright.com or
contact the Copyright Clearance Center, Inc. (CCC), 222 Rosewood Drive, Danvers, MA 01923, 978-750-
8400. For works that are not available on CCC please contact [email protected]
Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used
only for identification and explanation without intent to infringe.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
ISBN: 978-1-032-55008-4
Ebook: 978-1-003-42853-4
ISSN: 0306-3046
DOI: 10.1201/9781003428534
PART 1: GENERAL
Market Update 3
Capital Allowances 7
Value Added Tax 13
The Aggregates Levy 21
Land Remediation 25
Building Regulations 33
Research & Development (R&D) Tax Relief 37
Building Costs Indices, Tender Price Indices and Location Factors 43
INDEX 755
Preface to the One Hundred and
Forty-Ninth Edition
The construction sector continues to show resilience despite multiple pressures from unprecedented local and global events
impacting throughout 2022–2023. The war in Ukraine continues to constrain supply chain capacity, with price increases further
compounded by the associated energy market disruption, and labour vacancy rates remaining higher than pre-pandemic levels.
The optimism caused from the observed rallying after the pandemic has subsided, with a continuing high inflationary
environment and financial uncertainty increasing globally, a recession is increasingly being predicted.
Source ONS
A range of factors both emerging and extant continue to propel input cost inflation with the impact of not only increasing costs
but shortening periods for which prices are being held, itself increasing uncertainty and adding to construction project
administration overheads.
viii Preface
Higher international logistics costs, returning demand from industry workload, and higher global metals prices are some of the
ingredients to quicker building cost inflation. EU markets have been a significant source of supply for a wide range of
construction materials and prices and these are impacted by the ongoing Ukraine war and continuing adjustment post-Brexit.
Due to the fast rate of change and ongoing volatilities, readers are recommended to register for Spon’s Updates which will
highlight changes to market rates and trends.
NOTE:
� Preliminaries are not included within the main Prices for Measured Works or in the Approximate Estimating Rates
sections of the book.
� Preliminaries are included in the rates within Building Prices per Functional Unit and Building Prices per Square Metre
sections.
Prices included within this edition do not include for VAT, professional fees etc. which must be added if appropriate.
Preface ix
� Building Prices per Functional Unit; Building Prices per Square Metre and Building Cost Models. It should be noted that
these sections all include site preliminaries. The only occasion this happens within the book.
� Approximate Estimating Rates shows typical composite built-up rates organized by building elements. Please note
these rates do not include for any site preliminaries.
There is also a section where we show typical preliminaries build up for a project valued at approximately £4,000,000. This is
intended for guidance only and should not be used as part of any tender submission.
Part 4: Prices for Measured Works
These sections contain Prices for Measured Works organized using the NRM2 Work Sections for building works.
NOTE: All prices in Part 4 exclude the main contractor’s preliminaries costs.
Part 5: Fees for Professional Services
This section contains guidance on fee levels for professional services; Quantity Surveyors, Architects, and Consulting Engi-
neers. Readers should always obtain fee proposals for their project prior to commencement as there are many factors that
influence fee submissions.
NOTE: Professional fees are not included in any rates in the book.
Part 6: Daywork and Prime Cost
This section contains Daywork and Prime Cost allowances issued by the Royal Institute of Chartered Surveyors.
Part 7: Useful Addresses for Further Information
A list of useful trade associations, professional bodies contact details.
Part 8: Tables and Memoranda
This section contains general formulae, weights and quantities of materials, other design criteria and useful memoranda
associated with each trade.
While every effort is made to ensure the accuracy of the information given in this publication, readers are reminded of the
merit of independently verifying any rates contained in this book prior to taking any decisions of material significance (com-
mercial or otherwise) based on such data. The Editors and Publishers of the book shall not accept, to the maximum extent
permitted under the law, any liability for any losses which result from the user placing reliance on information contained
herein.
AECOM Ltd
Aldgate Tower
2 Leman Street
London
E1 8FA
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Gradus
Tel: 01625 428 922
[email protected]
www.gradus.com
ACO Technologies plc Floor coverings and accessories
Tel: 01462 816666
[email protected]
www.aco.co.uk
Drainage channels
Kingspan
Tel: 01358 716100
[email protected]
ASSA ABLOY Entrance Systems Ltd www.kingspanpanels.co.uk
Tel: 0333 006 3443 Insulated wall and roof panels
[email protected]
www.assaabloyentrance.co.uk
Entrance systems
Profile 22
Building Innovation Tel: 01952 290910
Tel: 01926 888808 [email protected]
[email protected] www.profile22.co.uk
www.ecotherm.co.uk uPVC windows
Tapered insulation
xii Special Acknowledgements
Severfield plc
Tel: 01845 577896
[email protected]
www.severfield.com
Structural steel
Acknowledgements
Forticrete Ltd
Tel: 01525 244 900 Hathaway Roofing Ltd
[email protected]; Tel: 01388 605 636
[email protected] www.hathaway-roofing.co.uk
[email protected] Sheet wall and roof claddings
www.forticrete.co.uk
Blocks and roof tiles
Hillaldam Coburn Ltd
Tel: 020 8545 6680
F P McCann Ltd [email protected]
Tel. 028 7964 2558 www.coburn.co.uk
[email protected] Sliding and folding door gear
www.fpmccann.co.uk
Precast concrete goods
HSS Hire Shops
Tel: 020 8260 3100
Garador Ltd www.hss.co.uk
Tel: 01935 443700 Tool hire
www.garador.co.uk
Garage doors
Hudevad
Tel: 02476 881200
GCP Applied Technologies [email protected]
Tel: 01753 490000 www.hudevad.co.uk
[email protected] Radiators
https://gcpat.uk/en-gb
Expansion joint fillers and waterbars
Hunter Plastics Ltd
[email protected]
Gradus www.hunterplastics.co.uks
Tel: 01625 428 922 Plastic rainwater goods
[email protected]
www.gradus.com
Flooring and accessories Ibstock Building Products
Tel: 01530 261999
[email protected]
GRP Tanks www.ibstock.co.uk
Tel: 0871 200 2082 Facing bricks; Tilebricks
www.grptanks.net
GRP water tanks
xvi Acknowledgements
Junkers Ltd
Tel: 01376 534 700 Landpro Ltd
[email protected] Tel: 01252 795030
www.junkers.co.uk [email protected]
Hardwood flooring www.landpro.co.uk
Landscaping consultants
KB Rebar Ltd
Tel: 0161 790 8635 Lignacite
www.kbrebar.co.uk Tel: 01992 464 441
Reinforcement bar and mesh [email protected]
www.lignacite.co.uk
Concrete blocks
Kingspan Access Floors
Tel: 01482 781 710
[email protected] Maccaferri
www.kingspanaccessfloors.co.uk Tel: 01865 770 555
Raised access floors [email protected]
www.maccaferri.co.uk
Gabions
Acknowledgements xvii
Plumb Centre
Manhole Covers Ltd Tel: 0870 1622 557
Tel: 01296 668850 www.plumbcentre.co.uk
sales@manholecovers Cylinders & general plumbing
www.manholecovers.com
Manhole covers
Polyflor Ltd
Tel: 0161 767 1111
Marshalls CPM www.polyflor.com
Tel: 01179 814500 Polyfloor contract flooring
[email protected]
www.marshalls.co.uk
Concrete pipes etc. Polypipe Terrain
Tel: 01622 717811
[email protected]
Marshalls Mono Ltd (drainage) www.terraindrainage.com
Tel: 01422 312000 Drainage goods
[email protected]
www.marshalls.co.uk
Drainage channels Premdor Ltd
Tel: 01793 708200
[email protected]
Marshalls Mono Ltd www.premdor.co.uk
Tel: 01422 312000 Doors and windows
[email protected]
www.marshalls.co.uk
Pavings Premier Loft Ladders
Tel: 0845 9000 195
[email protected]
Metsec Lattice Beams Ltd www.premierloftladders.com
[email protected] Loft ladders
www.metseclatticebeams.com
Lattice beams
Pressalit Care plc
Tel: 0844 880 6950
Monier Ltd www.pressalitcare.com
Tel: 01293 618418 Bathroom equipment
[email protected]
www.redland.co.uk
Redland roof tiles Profile 22
[email protected]
www.profile22.co.uk
NDM Metal Roofing & Cladding Ltd uPVC windows
Tel: 020 8991 7310
[email protected]
www.ndmltd.com
Metal cladding and roofing
xviii Acknowledgements
Saint-Gobain PAM UK
Protim Solignum Ltd Tel: 0115 930 5000
Tel: 01628 486644 [email protected]
[email protected] www.saint-gobain-pam.co.uk/
www.osmose.co.uk Cast iron soil, water and rainwater pipes and fittings
Paints and timber treatment
Stainless UK Ltd
Tel: 0114 244 1333 Tarmac Mortar and Screeds
[email protected] Tel: 08701 116 116
www.stainless-uk.co.uk [email protected]
Stainless steel rebar www.tarmac.co.uk
Readymix screeds and mortar
Vandex
Tel: 01403 210204 Web Dynamics Ltd
[email protected] Tel: 01204 695 666
www.vandex.com www.webdynamics.co.uk
Vandex Super and Premix products Breather membranes
First time users of Spon's Architects' & Builders' Price Book (Spon’s A & B) and others who may not be familiar with the way in
which prices are compiled may find it helpful to read this section before starting to calculate the costs of building work. The
level of information on a scheme and availability of detailed specifications will determine which section of the book and which
level of prices users should refer to.
We have rebased our TENDER PRICE INDEX to 2015 = 100 (from 1976 = 100).
Prices in the book do not necessarily and are not intended to represent the lowest possible prices achievable but are intended
as a guide to expected price levels for the items described. AECOM cost a series of building models using current Spon’s
rates to calculate a book Tender Price Index (TPI).
For this edition of the book TPI has been calculated at 167 (2015 = 100).
Rates in the book include overhead and recovery margins but do not include main contractors’ preliminaries: except for two
sections:
� NRM1 – Order of cost estimating and cost planning for capital building works.
� NRM2 – Detailed measurement for building works.
� NRM3 – Order of cost estimating and cost planning for building maintenance works.
APPROXIMATE ESTIMATING
For preliminary estimates/indicative costs before drawings are prepared or very little information is available, users are
advised to refer to the average overall Building Prices per Functional Unit and multiply this by the proposed number of units to
be contained within the building (i.e. number of bedrooms etc.) or Building Prices per Square Metre rates and multiply this by
the gross internal floor area of the building (the sum of all floor areas measured within external walls) to arrive at an overall
initial Order of Cost Estimate. These rates include preliminaries but make no allowance for the cost of external works, VAT, or
fees for provisional services.
Where preliminary drawings are available, one should be able to measure approximate quantities for all the major compo-
nents of a building and multiply these by individual rates contained in the Building Cost Models or Approximate Estimating
Rates sections to produce an Elemental Cost Plan. This should produce a more accurate estimate of cost than simply using
overall prices per square metre. Labour and other incidental associated items, although normally measured separately within
Bills of Quantities, are deemed included within approximate estimating rates. These rates do not include preliminaries or fees
for professional services.
MEASURED WORKS
For more detailed estimates or documents such as Bills of Quantities (Quantities of supplied and fixed components in a
building, measured from drawings), use rates from Prices for Measured Works. Depending upon the overall value of the
contract, readers may want to adjust the value and we have added a simple chart which shows typical adjustments that could
be applied as shown later in this chapter. Items within the Measured Works sections are made up of many components: the
xxii How to use this Book
cost of the material or product; any additional materials needed to carry out the work; plant required; and the labour involved
in unloading and fixing, etc.
Labour
This figure covers the cost of the operation and is calculated on the gang wage rate (skilled or unskilled) and the time needed
for the job. A full explanation and build-up is provided. Large regular or continuous areas of work are more economical to
install than smaller complex areas.
Plant
Plant covers the use of machinery ranging from excavators and dumpers to static plant and includes running costs such as
fuel, water supply, electricity and waste disposal. Small hand-held plant costs are not included.
Materials
Material prices include the cost of any ancillary materials, nails, screws, waste, etc., which may be needed in association with
the main material product/s. If the material being priced varies from a standard measured rate, then identify the difference
between the original Prime Cost (PC – see below) price and the material price and add this to an alternative material price
before adding to the labour cost to produce a new overall total rate. Alternative material prices, where given, are largely based
upon list prices, before the deduction of quantity discounts etc., and therefore require discount adjustment before they can be
substituted in place of PC figures given for Measured Work items.
Prime Cost
Commonly known as the PC; Prime Cost is the actual price of the material such as bricks, blocks, tiles or paint, as sold by
suppliers. Prime Cost may be given as per square metre, per 100 bags or each according to the way the supplier sells the
product. Unless otherwise stated, prices in Spon's Architects’ & Builders’ are deemed to be delivered to site (in which case
transport costs will be included), and take account of trade and quantity discounts. Part loads generally cost more than whole
loads but, unless otherwise stated, Prime Cost figures are based on average prices for full loads delivered to a hypothetical
site in Acton, West London. Actual prices for live projects will vary depending on the contractor, supplier, the distance from the
supplier to the site, the accessibility of the site, whether the whole quantity ordered is to be supplied in one delivery or at
specified dates and market conditions prevailing at the time. Prime Cost figures for commonly used alternative materials are
supplied in listed form at the beginning of some work sections.
Where a PC rate is entered alongside an item rate then the cost allowed for that item is in the overall material cost. For
instance, bricks need mortar; paving needs sand bedding, so the PC cost is simply for the cost of bricks or paving, thus
allowing the user to simply substitute an alternative product cost if desired.
Example:
Total Rate
Item (NB example data only) PC £ Labour £ Material £ Unit £
Unit
The Unit is generally based upon measurement guidelines laid out in the New Rules of Measurement – Detailed measure-
ment for building works (NRM2).
Total Rate
Prices in the Total Rate column generally include for the supply and fix of items, unless otherwise described.
Preliminaries
Site specific Main Contractor's overheads on a contract, such as insurances, site accommodation, security, temporary roads
and the statutory health and welfare of the labour force, are not directly assignable to individual items so they are generally
added as a percentage or calculated allowances after all building component items have been costed and totalled. Pre-
liminaries will vary from project to project according to the type of construction, difficulties of the site, labour shortage, or
involvement with other contractors, etc. The overall addition for a scheme should be adjusted to allow for these factors.
COST PLANNING
Rates will need to be updated to current estimate base date by the amount of inflation occurring from the base date of the cost
data to the current estimate base date. The percentage addition can be calculated using published indices (i.e. tender price
indices (TPI)).
Example 1:
Cost (£)
School rate, say £1,800/m2 × 15,000 m2 = 27,000,000
Adjust for inflation to start date (128.4/124) say +3.5% 945,000
subtotal 27,945,000
Adjust for location −10%, say −2,795,000
subtotal 25,150,000
Allow for contingencies say 10% 2,515,000
Main contractor’s preliminaries, overheads and profit need not be added to the cost of building works as they are included
within the Spon’s building prices per square metre rates, but further additions would be needed for professional fees and other
enabling works costs such as site clearance, demolition, external works, car parking, bringing services to site etc.
How to use this Book xxv
Example 2:
Health Centre
Note: example data only
Gross Internal Floor Area = 1,000 m2
Cost plan prepared with TPI = 124
Start on site TPI, say = 128.4 (actual index to be selected from current published TPI)
Location: South West (adjustment, say = 0.90)
subtotal 1,495,560
Adjust for inflation to start date (128.4/124) say +3.5% 52,000
subtotal 1,495,560
Adjust for location say −10% −155,000
subtotal 1,392,560
Allow for contingencies say 5% 70,000
Other allowances such as consultants’ fees, design fee, VAT, risk allowance, client costs, fixed price adjustment may need to
be added to each of the examples above.
Formal Cost Plan 1 is prepared at a point where the scope of work is fully defined, and key criteria are specified but no
detailed design has begun. Formal Cost Plan 1 will provide the frame of reference for Formal Cost Plan 2. Likewise, Formal
Cost Plan 2 will provide the frame of reference for Formal Cost Plan 3. Neither Formal Cost Plans 2 nor 3 involve the pre-
paration of a completely new Elemental Cost Plan; they are progressions of the previous cost plans, which are developed
through the cost checking of price significant components and cost targets as more design information and further information
about the site becomes available.
Cost plans can be developed using from Elemental Cost Plans using both Approximate Estimating Rates and/or Prices for
Measured Works depending upon the level of information available.
The cost targets within each formal cost plan approved by the employer will be used as the baseline for future cost compar-
isons. Each subsequent cost plan will require reconciliation with the preceding cost plan and explanations relating to changes
made. In view of this, it is essential that records of any transfers made to or from the risk allowances and any adjustments
made to cost targets are maintained, so that explanations concerning changes can be provided to both the employer and the
project team.
£5,000,000 −1%
£3,500,000 0%
£2,750,000 1%
£2,000,000 2%
£1,250,000 3%
£1,000,000 4%
Spon’s Architects’ & Builders’ Price Book is targeted at new build projects with a value range of approximately £3,000,000 –
£5,000,000.
Users should not simply apply percentage adjustments to any project regardless of size. We recommend project values
between £2,000,000 and £5,000,000 for rates found in Spon’s A & B could be adjusted according to the above table. This is
given only as an indication and users should always remember that there are many factors that affect the overall project costs.
These numbers are only intended as a guide and are not explicit and should be applied to the total project value only, not
individual rates.
SPON’S 2024 PRICEBOOKS from AECOM
Spon’s Architects’ and Builders’ Price Spon’s Civil Engineering and
Book 2024 Highway Works Price Book 2024
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ESSENTIAL READING FROM TAYLOR AND FRANCIS
The Metric Handbook is the major handbook of planning and design data for
architects and architecture students. Covering basic design data for all the major
building types it is the ideal starting point for any project. For each building type, the
book gives the basic design requirements and all the principal dimensional data, and
succinct guidance on how to use the information and what regulations the designer
needs to be aware of.
As well as buildings, the Metric Handbook deals with broader aspects of design
such as materials, acoustics and lighting, and general design data on human
dimensions and space requirements. The Metric Handbook is the unique reference
for solving everyday planning problems.
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General
Page
Market Update 3
Capital Allowances 7
Value Added Tax 13
The Aggregates Levy 21
Land Remediation 25
Building Regulations 33
Research & Development (R&D) Tax Relief 37
Building Costs Indices, Tender Price Indices and Location Factors 43
ESSENTIAL READING FROM TAYLOR AND FRANCIS
This handy pocket book brings together a wealth of useful information that
architects need on a daily basis – on-site or in the studio.
This is the famous little blue book that you can’t afford to be without.
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Construction output has been on the up, but can this continue in the face of economic uncertainty and high interest rates?
Housebuilding in particular looks set for a fall in demand, and the overall outlook is questionable. It’s going to be a challenging
12 months for the UK construction industry and inflation remains high compared with long-term average levels.
The subsector analysis reveals some areas of concern. A number of the subsectors shared the same pattern as the overall
new work output measure, in being higher over the year on a Q4 2021 versus Q4 2022 basis, yet fell on the nearer time frame
comparison between December 2022 and January 2023. For a long time, the private housing sector’s output across the UK
was the primary driver of industry growth. Except for the months in the pandemic year of 2020, the most recent fall in output
was only the second time in almost 10 years from mid 2013 where the year-to-year change in output was discernibly negative.
This is a remarkable trend of continuous expansion of activity in this subsector.
4 Market Update
More broadly, new orders data is mixed and not signalling a definitive route ahead about the future path of output. Anecdotal
evidence combined with a collection of published surveys suggest that economic uncertainty is leading to some project delays
and a dent in overall demand.
The latest industry forecast from the Construction Products Association (CPA) suggests construction output will contract by
6.4% in 2023, primarily driven by a short but sharp anticipated downturn in housebuilding activity and a reduction in repair and
maintenance expenditure in the housing sector. By 2024, it is anticipated that the factors constraining house building activity in
2023 – the impact of higher mortgage interest rates on demand and strong input cost inflation further dampening viability – will
continue to improve in 2024. Overall construction output is forecast to rise by 1.1% in 2024 and 4.3% in 2025.
Building costs
Construction input cost pressures are easing. AECOM’s building cost index – a composite measure of materials and labour
costs – increased by 7.4% over the 12 months to February 2023. This continues a period of sustained disinflation that started
last year, with the current rate of inflation almost half that recorded in the middle of 2022. Slower rates of building cost inflation
will help to alleviate some of the commercial pressures stretching across the whole supply chain. Labour rate inflation still
displays a range that waxes and wanes depending on situational demand at any point. An overall inflation rate of broadly 4%
to 5% across an aggregate measure has been remarkably consistent for some time.
Of the large range of components making up the building cost index, only five categories record negative year-to-year change,
four of which are timber-based work items and one metals-related. Previously in December only one work category displayed
a negative yearly rate of change. These latest data points very probably result from deflationary trends in timber and metals
commodities prices that were in evidence over the second half of 2022. A minor complication arises from start-of-year mate-
rials price increases, which are now taking effect and will contribute to areas of ongoing elevated cost pressures. Other factors
contributing to the disinflationary headline rate of input cost inflation include base effects in the calculation and a slight rise in
sterling during Q4, helping to alleviate some of the imported inflationary trends.
Market Update 5
Tender prices
AECOM’s tender price inflation index rose by 10.7% over the 12 months to Q1 2023. Further, Q4 of 2022 saw an upward
revision, securing 2022’s place as a record-breaking year for construction price growth. This trend continues, underpinned by
input cost inflation, momentum in workload albeit with some trend changes, and a tight labour market. While input cost infla-
tion pressure is dissipating, the structural issues around supply chain and labour market capacity are longstanding and will
continue to amplify price growth.
When risk aversion is added to those pricing dynamics, there is a firm likelihood of fairly strong price inflation through to mid
2023. The industry is entering a period of real price growth – in other words, price growth greater than the related input cost
rate of change. Meanwhile, quarter-to-quarter movements for trades pricing continue to show resolute increases, pushing up
the top end of the ranges in tender prices for key trades, and price trends are expected to be inflationary over Q1 2023.
Similarly, preliminaries and oncosts are higher over the 12-month period.
Outlook
To maintain or grow current construction output levels, what will provide new demand for the sector in 2023? Total construc-
tion output maintained a steady pace over 2022. Nonetheless, slower trends are evident across the two large subsector
classifications – new work and repair and maintenance. This relates to the twin problems of the prevailing inflationary back-
drop and a significantly higher interest rate environment. For the private sector, greater risks proliferate around returns for
developers and client organizations procuring construction services. Delays to public sector projects are evident too, as rising
costs stretch budgets to their limits.
The construction sector will feel a chill from tighter financing conditions and the fallout from lagged effects of the different
monetary policy environment over the past 15 months. The end of a decade of cheap money has raised the hurdles for
investment decisions. This will have direct impacts on project viability, demand and, ultimately, workload as buyers of con-
struction services grapple with higher money market rates. Inevitably, some projects will see delays, especially those already
deemed marginal, more so when inflation pressures are added to the mix.
The private housing sector is acting as something of a canary in the coalmine. A slew of market updates by the large
housebuilders early in 2023 predicted lower housebuilding volumes in the near term. A slower housing sector will create ripple
effects across the whole industry, bringing down overall construction output, though one positive benefit will be through an
easing of some of the industry’s perennial workforce supply constraints around labour and essential trades. For the time
being, labour rates are likely to stay on a steady inflationary course unless a significant fall in activity occurs. Additionally, an
easing of pressures on materials supplies can be expected, as the housing sector is larger than many others.
Borrowing and financing conditions are likely to supplant inflation as the number one issue afflicting the economy and busi-
nesses as 2023 progresses, assuming there is not a radical monetary policy shift that cuts interest rates. This is not to say
inflation will cease to be a headache. However, the Bank of England’s series of 11 consecutive bank rate rises through 2022
and 2023 moved it to its highest level since 2008. Looking in the rear-view mirror, the bank rate of 0.25% at the start of 2022 is
a sobering backdrop. The spillovers from this higher rate environment into the economy are starting to take hold. There are
direct and indirect effects for the construction sector, as access to and the cost of capital becomes more trying.
A question remains for policy-makers whether to carry on increasing interest rates given the pervasiveness of inflation,
especially as headline consumer price inflation rose again in March. Additionally, a conundrum exists as to how much of the
recent inflationary trends are transitory. The split decisions among the monetary policy committee about any rate rises are
telling.
The effects of 2022’s relentless rise in interest rates will continue to impact investment and purchase decisions for some time
yet, as interest rates stay elevated over 2023. Interest rates are only likely to fall in the near term if the economic outlook
darkens.
The higher interest rate environment introduces additional risks to a construction supply chain that has experienced com-
mercial stress for some time now. Though subcontractors are generally at higher risk of insolvency, firms with stronger bal-
ance sheets and robust corporate governance, and those who can offset risks in some way – perhaps through strategic
procurement strength – are likely to fare better in the prevailing environment. Other factors play a part, and some of a firm’s
financial situation will depend on what it has successfully tendered over the last two years, at what prices, and whether con-
tract mechanisms exist for it to mitigate or recover additional inflation costs. Input cost inflationary pressures are expected to
ease this year, though commercial stress will remain because costs are still rising over any 12-month measurement period.
The prospect of higher competition levels suppressing tender price inflation growth also becomes a factor this year.
6 Market Update
High rates of general price inflation are an enduring problem, likely to persist over 2023. Specifically for our sector, construc-
tion input cost and price inflation trends are likely to follow a similar narrative as that for consumer prices. The ongoing mix
of issues and current workload momentum will ensure that tender price inflation continues steadily over the first half of 2023.
AECOM’s baseline forecast for tender prices is a 5% increase from Q1 2023 to Q1 2024, and a 3% increase from Q1 2024 to
Q1 2025. The balance of risks to forecasts of price trends is balanced evenly now over the first 12-month period, because of
rising concerns across the financial sector globally and associated risks for the UK economy.