Surging labour costs push tender price forecast up

Aaron Morby 3 weeks ago
Share

Mace has revised its tender price forecast up for the year due to surging labour costs.

Recent data reveals that construction vacancies have surged to their highest level in 18 months, leading to persistent labour shortages.

Image copyright Michael Molloy


In the final quarter of 2024, labour costs rose by 1.6%, marking a 6.5% year-on-year increase.

Construction pay is now rising faster than in all but one other industry sector and is growing at its second highest rate since coming out of the pandemic.

Mace warns that higher energy prices and the rise in National Insurance and National Living Wage will also lead to upward cost pressure which has prompted the firm in its latest quarterly forecast to raise its tender price inflation forecast for this year.

Nationally, Mace’s updated forecast has risen from 3.5% to 4% for 2025, while 2026, 2027 and 2028 has been left unchanged. In London, the forecast is up from 3% to 3.5% in 2025 with 2026, 2027 and 2028 also remaining the same.

Tender price forecast


Although it remains an uncertain time, as output and the wider economy awaits the impact of policy changes that are expected to have a positive long-term impact, the report concludes that growth in construction in 2025 should comfortably beat that of 2024.

Oliver North, director of Cost and Commercial Management, Europe, Mace Consult said: “Driven by labour costs as vacancies continue to rise, Mace has increased its latest tender price forecast. However, with vacancies on the agenda to solve, this can be met in part with a focus on productivity, which remains low.

“The welcome recent government funding announcement, incorporating £600m to train 60,000 more construction workers, will be crucial in addressing shortages and supporting the industry’s growth also.

“However, economic and political uncertainties remain, and whilse the steps being made when it comes to planning, devolution and funding for the Building Safety Regulator will have a long-term impact, processes need to speed up to boost confidence, help secure pipelines and encourage investment”.

Latest news

Sir Robert McAlpine claws way back into profit

Firm says return to profit and strong cash balance validates new strategy
21 hours ago

Aston Villa to revamp North Stand

Club to reuse existing structure rather than complete rebuild
17 hours ago

Final phase of £1.5bn Elephant and Castle revamp hits planning

Get Living submits revised plan for 500 homes and 450-bed student block
18 hours ago

Severfield to cut staff by 6% amid pricing pressure

Steelwork contractor warns of extended tighter pricing due to project delays
21 hours ago

JRL completes sale of 50% stake to Malaysian giant IJM

Deal boosts balance sheet and kicks starts growth plan
22 hours ago

Green light for £100m Liverpool Baltic station build

Enabling highway works to start in the autumn
2 days ago

First live tests for flying construction robots

Drones can lay construction materials at height on site
21 hours ago

Three firms land £170m Gentoo Sunderland housing deal

PHS Solutions, Esh and RE:GEN to deliver 10-year home upgrade plan
2 days ago

Gateway gridlock hits build-to-rent delivery as starts nosedive

Build to rent starts plunge 18% in the capital
2 days ago

Call to shift Gateway 2 checks to end building bottleneck

"The current system isn't working but we all want to see safe buildings"
2 days ago

GBN launches £600m bid race for SMR engineer roles

Owner engineers to provide technical and assurance services
2 days ago

Wates hires ex-Homes England chief to head public sector push

Robert Stone to spearhead its public sector and national frameworks strategy
2 days ago

Acheson Construction collapse costs suppliers £8.5m

One frustrated creditor seized a telehandler after contractor went into administration
3 days ago

Dominus wins go-ahead for 173-bed Glasgow scheme

Old Wynd Street job expected to cost around £25m to build
3 days ago

Safety Regulator misses deadline to clear Gateway 2 backlog

Investors pulling out of funding high rise buildings
3 days ago

CITB still sitting on £95m cash pile

Staff numbers jump from 666 to 763 as training body wage bill soars
3 days ago

£500m road surfacing framework market call

NEPO goes out to consultation on north east regional highways deal
3 days ago

Two share £220m Scottish rail repairs and minor works deal

AmcoGiffen and CPMS win civils and building repair deals
3 days ago

Builder wanted for £60m London leisure and flats job

Tower Hamlets aims to replace St George’s Leisure Centre in Shadwell
3 days ago

Contractor confirmed for business park expansion

Roe Developments to start on next phase of Castle Donington scheme
3 days ago

Driver escapes injury as scaffold collapses onto van

Major three-lift scaffold fall blocks north London high street
1 week ago

Gilbert Ash to be sold to staff

£267m turnover contractor to transition to an Employee Ownership Trust
1 week ago

M Group seals biggest-ever deal with Telent takeover

Digital infrastructure specialist deal lifts turnover to £3bn
1 week ago

Aggregates firm Ashville went down owing more than £3m

Debts revealed in Companies House update
1 week ago

Cardo saves 100 jobs at Breyer roofing arm

Private equity-backed Welsh maintenance group continues to expand
1 week ago

Excavator knocked off lorry going under bridge

Traffic Commissioner inquiry after accident in south London
1 week ago

Czech energy tycoon buys UK’s biggest rebar supplier

Spanish offload Celsa UK operation to be rebranded 7 Steel UK
1 week ago

Caddick Construction targets £400m turnover

Regional shake-up pays off at contracting arm
1 week ago

Redrow chief steps down after Barratt merger

Matthew Pratt leaving after 22 years
1 week ago

United Living names new property services senior team

New CEO and COO appointed to lead growth in housing upkeep and retrofit
1 week ago

Contractor services