For this review we have increased our prediction for tender prices from an upper limit of 0.75% in the 1st quarter review to 2.75%. In the last publication we adopted a cautious approach based on the situation where the Bank of England were predicting a double dip recession, the uncertainty of whether the vaccine roll out would be successful, the threat of further lockdowns and the doubt if the rising confidence would be maintained.

The previous Construction Intelligence Report also warned of the growing threat of material and labour shortages. The global resurgence in construction has brought with it a global material shortage owing to limited supply struggling to be restocked and the associated logistic problems brought about because of the pandemic. The UK is faced with a long-term labour shortage with projections suggesting that we maybe 200,000+ workers short of the number needed.

After a brief period where construction output was above the pre-pandemic level the latest ONS report reported that it had dipped below as the problems of materials and labour resources contributed to this delay.

In the first half of 2021 tender prices did not rise in line with the increased costs of materials and labour. Contractors were keen to secure full order books and the construction food chain was squeezed to absorb increases, but with the benefit of high confidence, large investment in infrastructure work, coupled with housing demand and promised government expenditure, construction has rebounded quickly. With this comes the dilemma of how the contractor looks to pass on the material and labour cost increases and ensures profitability whilst obtaining work.