Construction product prices continue to rise

Tender prices continue to soar, particularly for large and complex projects in Central London, according to a report by cost management consultancy Davis Langdon.

Contractors now hold the bargaining power in contract negotiations, the report says, with every sector growing rapidly. This is enabling the inclusion of large risk allowances and healthy margins.

In Greater London the volume of new build output rose 18% in cash terms to a value exceeding £10bn for the first time. This rate of growth was matched by the North-East.

With a disproportionate number of large projects being introduced and a limited number of contractors able to take them on, a premium of 4% over and above underlying inflation over the last year, the report claims.

The report also indicates that the price of construction materials will continue to rocket. Last year prices rose 10% and the first five months of this year saw a rise of 2.9%.

There is no sign of a slowdown in timber prices. Softwood prices have leapt up 33% since the start of 2006, including 15% for the first five months of 2007.

Suppliers are now looking elsewhere in an attempt to reign in the increases. Travis Perkins chief executive Geoff Cooper told CJ that the company is now looking to import timber from Canada to deal with the shortfall, with surplus available following the slowdown in the US construction market.

Steel prices have risen nearly 50% in Europe over the last 18 months, the report says. In the UK the price of fabricated steel has gone up 25% in the last year. But the price rise has slowed in 2007, with a 7% increase since the beginning of the year.