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Tender prices for new construction keep falling until 2011

However should the recession in housing, industrial and commercial in the private sector be more drawn out than predicted in the central forecast, with growth not returning until 2012, then the price of new construction work will continue to fall through 2011 at a rate of 1.9%. A cut in public spending would have a similar effect on tender prices, meaning tenders would suffer around a 15% peak to trough fall over a period of four years.

Such cuts would also see the rate of growth in tender prices, once it comes, move more slowly. If public spending in construction were to be cut by 10 percent per year between 2011 and 2013, then tenders would only rise by around 7.5 percent over the two years, 2012 to 2013, compared with around 9.5 percent in the central forecast.

Joe Martin, Executive Director of BCIS said: "Despite seeing slightly more positive data coming from the construction sector in recent months with output starting to fall at a slower rate, it is evident that the fall in tender prices will continue. It is clear that public finance is having a positive effect on output with recent data demonstrating that new work actually picked up in the second quarter, led by a sharp increase in the contribution from the public sector.

"As a result any cut in the supply of public money will have a detrimental effect on any recovery. Our forecast indicates that not only would tenders keep falling for longer, but any subsequent recovery would be much slower and it will be several years before we see prices reach pre-recession levels."

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