- Construction activity remains stable with increasing signs of tempering tender pricing.
- Input cost inflation remains stubbornly high, further threatening already narrow margins in the supply chain.
- Brexit contingency planning for projects now in the spotlight.
The Market View is Arcadis’ quarterly piece of analysis of the UK construction market, looking at each sector and region to deliver a tender price forecast to inform clients about what is going on in UK construction, helping financial decision making for projects and programmes.
The in-depth research shows that although construction activity remains stable with increasing signs of tempering tender pricing, cost inflation remains stubbornly high at around 5 per cent, further threatening already narrow margins in the supply chain. Looking ahead, it is likely that the exposure to Brexit related challenges may further affect cost inflation and lead to a slowdown in construction activity.
With political tensions high in Westminster and Brussels around the shape of a final deal, Arcadis has set out a ‘five-point plan’ to build resilience into the construction industry and ensure businesses are prepared for whatever outcomes may emerge from the negotiations with the EU. The key focus areas for the construction industry should be:
1. Engage closely with the supply chain
– quantify the proportion of EU nationals working on individual projects and plan for foreign currency fluctuations.
2. Review individual procurement strategies
– achieve clarity on where risk sits if there are unforeseen delays to projects.
3. Review contracts for any ‘Brexit clauses’
– make sure contracts are signed and engage closely with legal teams to fully understand contract clauses.
4. Undertake the necessary due diligence
– commission comprehensive cost and deliverability reviews of projects and check key areas of dependency
5. Make robust contingency plans
– ensure contingency funds are budgeted and review plans on a regular basis.
Will Waller, Head of Market Intelligence at Arcadis said:
“With less than five months to go before we leave the EU and political tensions high in Westminster and Brussels, it is no surprise that this uncertainty is unsettling the construction market with costs on the rise and labour supply shrinking.
“It is now important that we get on the front foot and put our Brexit contingency plans under the spotlight. Our five-point plan sets out a comprehensive check list to help create stable foundations for our sector, building agility and resilience into everything we do as we prepare for the UK’s exit from the EU.”
A copy of the Autumn 2018 Market Review can be found here