Building tender prices will decrease by at least 20% in the current cycle with falls of up to 25% in the hardest hit sectors, according to the latest forecast produced by Built Asset Consultancy, EC Harris.

The figures, which are published in the EC Harris 'Market View', indicate that the industry is likely to see three successive years of falling prices with cuts of around 10% in 2009 and 6% in 2010 to add to the current price falls.

Falling workload has created the cuts in tender prices and with construction activity only expected to move into positive figures in 2011, clients should be gearing up now to take advantage of low prices.

Paul Moore, Head of Cost Research at EC Harris said: "The aim should be for clients to benefit from reductions in construction costs whilst delivering developments to a recovering market. Waiting until the market recovers before committing to spend will probably mean losing the window of opportunity for maximising the benefit of low construction costs.


"Public sector capital works programmes should benefit from the significant reduction in construction costs, allowing the Government to achieve more from an increasingly strained public purse.

"The challenge however for the private sector is to understand how best to benefit from the current levels of pricing. Where funding is in place and the end user or business case is already aligned, there is certainly an opportunity to benefit."

The report also identifies supplier relationships as a key factor in market trends. The temptation for many clients will be to force suppliers to reduce contractually committed prices, but the 'Market View' warns that pushing supplier prices to loss making levels is unsustainable.

The recession should reinforce the need to forge stronger relationships to drive improved performance in time, quality, productivity as well as cost. A strong well managed supply chain will be a differentiator in the fight to secure the limited funding available in the future.

(CD/JM)