The BCIS predicts that building costs will increase by 15% over the next five years, while tender prices will rise by 20% over the same period.
Civil engineering costs will also rise by 15% but will see tender prices rising by 23%.
New work infrastructure output is expected to decline by 3% in 2024, before recovering from 2025 onwards. Output in this sector is forecast to rise by 19% over the next five years, driven by strong growth in the electricity sub-sector.
The BCIS All-in Tender Price Index, which measures the trend of contractors’ pricing levels in accepted tenders and the cost to client at commit to build, saw annual growth of 2.1% in the third quarter of2 024.
BCIS chief economist David Crosthwaite said: “The BCIS TPI panel has reported that contractors remain risk-averse and selective about the projects they bid on, but there has been more positivity around the project pipeline: 69% of panellists reported their anticipated pipeline of projects going to tender within the next 12 months increased slightly in the third quarter.”
Materials cost inflation has been moderating since peaking in 2022 and annual growth in the BCIS Materials Cost Index has been in negative territory in recent quarters. BCIS expects the index to grow by 15% over the forecast period.
New work infrastructure output is expected to decline by 3% in 2024, before recovering from 2025 onwards. Output in this sector is forecast to rise by 19% over the next five years, driven by strong growth in the electricity sub-sector.
Total new work output is forecast to grow by 24% over the forecast period.
Dr Crosthwaite added: “We’re expecting new work to contract by 4.9% overall in 2024, and for it to return to growth thereafter. There have been significant declines in the largest sub-sector by volume, private housing, which has seen a 24% fall in output since the peak at the end of 2022.
“From 2025 onwards, we are forecasting rapid growth in housing as pent-up demand is likely to feed through to house price growth, hopefully encouraging developers to start building again. Further, the recent modest base rate cut is likely to improve affordability, as home buyers adapt to what looks like being the new normal and interest rates settle at around the long-term trend of between 4% and 5%.”
