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Rics- New orders for construction fall 10%

Tuesday, 10 February 2009 3:43 PM

The construction industry suffered another blow today as new data show contactors are being forced to keep tenders low.

The Royal Institution of Chartered Surveyors (Rics) published the tender price index today, which said contractors are being forced to keep tenders low in an attempt to remain competitive and ride out the recession, as a result of new orders falling significantly and the demand for construction work drying up.

Overall new orders for construction fell ten per cent in quarter three of 2008, compared with the previous quarter, and 18 per cent compared with the same quarter the year earlier.

The price of new construction work fell by 0.8 per cent in the same quarter and the Building Cost Information Service (BCIS) expects tender prices to fall by a further ten per cent throughout 2009 and 2010.

Peter Rumble, BCIS information services manager, said: "The next two years are going to be tough on the construction industry. Contractors are going to have to be competitive in order to stay in business.

"As a result it is expected that the current trend of falling tender prices is going to continue for some time to come. Contractors who traditionally carry out a significant proportion of public sector work are likely to fair better than those carrying out mainly private sector work.

"However this is assuming that a prompt release of public funds is delivered, as promised in the pre-budget report, which is already looking unlikely."

The research also showed the costs of materials and wages rising were diminishing potential profits, and new work output is expected to fall in 2009 and 2010, with private housing, private industrial and private commercial set to suffer the most significant downturn over the next two years.

The BCIS research also said there was more optimism in the public sector with the government planning to bring forward many projects in an attempt to stave off the impact of the recession; however with many of these projects still struggling for private finance, doubts about the effectiveness of these measures are already being voiced.

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