Tender prices set to fall after 2000

Tender prices are set to fall in the next millennium, according to a report published by the Building Cost Information Service (BCIS).

BCIS forecasts that tender prices will rise above the level of inflation during 1998 and 1999, slowing in 2000 to below the level of inflation before falling marginally in the following two years.

However, millennium-led demand and lottery-funded growth should see increasing construction output through into the next century.

A spokesman for BCIS said: "The Government's declared intention is to beat the stop-go pattern that has bedevilled the economy.

"If they are successful, they will dampen the swings in the economy but it is very unlikely that they will be able to prevent the inevitable downturn that has followed all periods of growth.

"As a result, the cyclical pattern of construction output is likely to continue and following the Millennium, growth in output will slow down and eventually output will fall."

The forecast of new work output used in the BCIS forecast is based on significant growth in 1998, with the majority of millennium projects well under way.

Output growth will then start to fall off through the millennium, the forecast period culminating in small falls in output in 2001 and 2002.

BCIS said: "Tender prices have only recently risen above the levels experienced at the end of the 1980s. Predicted increases in tender prices will see construction prices over the next three years rise by 13 per cent, with prices falling by 1 per cent over the following two years.

"This is against a background of general inflation which is expected to rise by 14 per cent over the next five years."

Chris Powell, construction markets spokesman, said: "Current volatile markets and uncertainty over the future will bring both opportunities and problems for construction clients."