The Building Cost Information Service (BCIS) forecasts a significant disparity between civil tender prices and costs over the next five years.
- Tender prices are expected to rise by 22%, surpassing the anticipated 14% increase in civil engineering costs.
- Infrastructure output faced a 1.4% decline in 2024 but is projected to climb by 16% due to growth in the electricity sub-sector.
- Anticipated input cost growth includes an 18% rise in the index, with materials costs moderating from past spikes.
- Labour shortages pose a critical challenge, with the sector requiring 543,000 to 600,000 workers to meet forthcoming demand.
The Building Cost Information Service (BCIS) has projected a considerable increase of 22% in civil engineering tender prices over the next five years. This rise is notably higher than the predicted 14% increase in engineering costs, underlining a significant trend within the industry.
Despite an anticipated decline of 1.4% in infrastructure output in 2024, largely attributed to diminishing funding rounds in regulated sub-sectors, the sector is forecasted to recover robustly from 2025 onwards. Over the subsequent five years, output is expected to surge by 16%, driven predominantly by substantial advancements in the electricity distribution network.
According to David Crosthwaite, Chief Economist at BCIS, the forecast growth is propelled by enhancements in the electricity distribution network and unprecedented capital investment programmes by water companies. These developments constitute a strong pipeline of work, despite the temporary downturn expected in 2024.
On the cost side, input costs are projected to grow by 18%, while the inflation rate for civil engineering materials continues to moderate from its peak of 30.6% in the second quarter of 2022. Notably, significant annual increases have been observed in ready-mixed concrete, cast and spun iron products, bricks and clay products, and gas oil fuel, although steel indices are experiencing annual declines.
One of the most pressing challenges, as highlighted by the BCIS, is the capacity to deliver these projects amidst widespread skills shortages. To implement the planned investments, it is estimated that an annual average workforce ranging from 543,000 to 600,000 workers will be required over the next two years. This presents a substantial challenge for future governmental planning and resource allocation.
In summary, while civil tender prices are set to rise substantially, the sector faces capacity and skill challenges that must be addressed to meet future demand.
