Civil engineering costs are forecast to rise by around a quarter in the next five years, and tender prices by around a third, according to new analysis.
The latest report from RICS’ Building Cost Information Service shows civil engineering costs rose by 1.4% in the third quarter of 2015 compared with the previous quarter, but remained unchanged compared with the same period last year.
They are expected to fall over the year to Q3 2016, mainly as a result of falling oil prices. However, costs could rise sharply thereafter as oil bounces back, climbing by as much as 25 per cent over the next five years.
New work infrastructure output is expected to remain virtually flat this year. By 2017, output is predicted to fall, with the cycle of some major projects having passed peak as opposed to a downturn in the market. Moderate growth returns in 2018, and will slow slightly in 2019, before rising quite sharply in 2020 due to increased investment in major road schemes and a build-up of HS2 construction, assuming the project goes ahead.
Peter Rumble, head of forecasting for RICS’ BCIS division, said: “With civil engineering costs set to fall over the next year, a moderate increase in annual tender prices is expected in the year to the third quarter 2016.
“Over the next three years, input cost increases are likely to be the key driver of tender prices but, over 2020, the final year of the forecast period, stronger output growth, in addition to upward pressure from input costs, is expected to lead to a greater gap between costs and tender prices.
“Despite new infrastructure work output predicted to stall for the duration of 2016, the five-year forecast period remains significantly stronger than pre-2010 levels, which bodes well for the economy.”