Posted on September 11, 2024
The construction sector is showing signs of improvement due to a better economic outlook and increased workload. Arcadis’ latest Market View report, titled “Reasons to be Cheerful,” predicts low inflation in the building market through early 2025, with prices expected to increase by 3-4% next year and by 5-6% from 2026.
There’s increased activity in London and the South East, and Arcadis says that they may upgrade its London region forecast if this trend continues.
Infrastructure inflation remains varied, with lower levels in the rail and road sectors and higher escalation for water and electricity networks due to demand and scarcity.
Labour costs are expected to drive inflationary pressures in the upcoming construction cycle, as workloads increase, competence requirements tighten, and there are fewer opportunities to source labor from overseas. Contractors are taking a tougher commercial approach to tenders, focusing more on risk allocation and contractual terms.
The report also highlights the implementation of competence schemes, discussing the capacity constraints in Building Control Inspection since the end of the transition period in July 2024.
The report stresses the need for contractors and clients to monitor the implementation of these new frameworks to mitigate the risk of skills shortages, especially with the end of Grandfathering Rights for CSCS cards in December 2024 and the development of many other building safety related competence schemes.
Simon Rawlinson, head of strategic research and insight at Arcadis, commented, “The construction sector is facing a more challenging tendering market in 2024. Contractors need to adopt a more commercial approach to terms as they navigate an uncertain landscape. However, the improved economic outlook offers reasons to be optimistic as we move into 2025.”
