Costs push to squeeze margins

Input costs will rise by 6 to 7 % over the next year forcing contractors to raise tender prices or lose what slight margins they hold.

But the lack of new orders means that firms will struggle to pass on the price rises if they want to win work.

That is the grim message of the latest tender price forecast from cost consultant EC Harris.

'Contractors will have to put up prices by 6 to 6.5% nationally just to maintain margins,' said EC Harris chairman Chris Vickers. 'And frankly they are going to struggle to pass on the rises.'

The figure was more likely to be 7% in London and the south east.

Material prices are seen as the main villain in the building sector, rather than labour prices. The brief labour shortage last year seems to already be easing but some material prices are still rising dramatically.

Cement and glass prices are on the up, and this week British Steel strip products announced 8-12% rises in its prepainted products which are used in cladding and roofing.

Mansell chief executive David Beardsmore said that he would be passing on the price increases. He said: 'If suppliers and subcontractors increase their prices then we are forced to do the same because our margins are so thin.'

But Buxton chief executive Graham Davies said there was an alternative. 'We are fighting tooth and nail against the increases, which means we are not always paying the full amount,' he said.