The Welsh construction market mirrors the national outlook, with no anticipated price surges despite rising input costs. However, Cardiff stands out as a particularly buoyant area finds the latest RLB Wales Construction Market Intelligence Q4 report.
The Welsh Government seems to be investing heavily to attract investors into the region. The pipeline in the West and Wales looks strong, with Infrastructure and Healthcare seeing upwards trends. The residential market however has been weakened with investors suggesting finance costs are leaving schemes unviable but there is a desire to explore the viability of tall buildings across the region.
Daniel Walker, Associate at RLB Wales comments, “Much of the Welsh construction activity is driven by investors and varies across sectors. Infrastructure and Healthcare continue to be strong markets, but the Welsh housing market has been dampened by investors’ caution around the viability of projects.”
Construction tender price inflation on stable trajectory despite rising input costs, reports RLB
No significant breakout in tender prices is expected in the UK construction sector even though input costs continue to rise. The RLB weighted average of tender price uplifts, weighted by regional volume of ONS New Orders, shows a very slight firming of tender price movements at a national level, which RLB says is reflective of recent workload uplift and expectations of upcoming spend from the public sector.
As of Q4 2024, RLB’s forecast tender price uplift for 2024 is 3.03%, slightly up from its previous quarter’s forecast of 2.97%. Although these changes are in the upward direction, they are only very slight and as such do not represent any great expectation of a price breakout, even though input costs continue to increase at a slightly higher rate overall next year.
The BCIS Tender Price Index for 2024 is lower at 2.23% than RLB’s national overview, but the indexes correspond more closely next year, before reporting similar numbers from 2026 onwards. The BCIS tender price uplift figure is outstripped by the BCIS General Building Cost Index, which currently forecasts cost figures uplifting by 2.89% this year, with 3.22% to come next year. Further, the upcoming changes to National Insurance Contributions (NIC) will affect labour costs. According to BCIS, the long-term trend of +2.5% per annum will only return in 2027. Ongoing labour cost increases for 2024 are over +5%, with +6.5% forecast for 2025 before falling back to more familiar territory.
While costs generally remain on an upward curve overall, there are clear indications of falls in some producer price levels, in particular, for steel and timber products. For fabricated structural steel, the fall is recorded as being almost 7.5%, which obviously bears proportionately more heavily on steel-framed building solutions. Looking ahead, fuel cost changes may again feed into this equation, as will undoubtedly the impact of increasing infrastructure spend incorporating large volumes of reinforced concrete and fabricated steel sections. This suggests increasing pressure on margins as contractors move to refill order books. A significant increase in available workload could further exacerbate any tender price instability.
To read the Q4 edition of Construction Market Intelligence, visit Construction Market Intelligence UK Edition Q4 2024 – RLB | Europe
Image provided by RLB CMI Wales
