TURNER & Townsend has said that ‘soaring’ inflation in the UK construction sector exacerbated by the war in Ukraine means businesses should focus on securing a ‘resilient’ supply chain and ‘getting the basics right to guard against further shocks’.
The professional services business’ latest UK Market Intelligence Report (UKMI) shows ‘significant’ upward revisions to its quarterly forecasts – particularly the inflationary predictions for 2022. This is driven by rising energy costs as the impact of the Ukraine crisis resonates through global supply chains.
Turner & Townsend’s central forecasts for tender price rises in 2022 now sit at 8.5% for real estate and 6% for infrastructure, much higher than that of the winter 2021/22 predictions of 4.5 and 4% for the same period.
The report revealed that the Ukraine conflict has had a ‘significant near-term impact’ on inflation, on top of other issues including pandemic and Brexit disruption.
Turner & Townsend’s analysis points to a sustained impact from these multiple factors through 2022 but indicates a settling of conditions thereafter, with long-term tender price forecasts for 2025 at 4% for real estate and 5% for infrastructure.
Andrew Outram, director and head of real estate, Scotland, at Turner & Townsend, said, “This year started with a lot of promise for the Scottish industry, with Covid-19 numbers predicted to continue to fall due to the vaccine roll out, industry orders were looking likely to return to pre-pandemic levels. Whilst both these points have more or less come true; the increase in cost of living, caused mainly by the energy crisis and events in Europe, has affected building material manufacture prices and has created new pressure to contend with.
“A little-known fact in Scotland is that many operatives (skilled and unskilled) have been lost to the industry in the last two years and we have not yet seen the effect of this shortage on labour prices. This volatile situation could continue until at least the end of the year but the construction sector has shown considerable resilience when faced with other crises in recent years.
“To navigate this period, we need to be very alive to these industry changes and pressures and make sure clients are informed and up to date at all times regarding the impact this may have on their projects and programmes in the changing situation. More than ever, clients need confidence and need to be provided with relevant information in order for them to be able to use their best judgement around costs and programme to achieve project goals and objectives.”