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Tender prices fell for the seventh consecutive quarter* in Q3 2009 but costs stabilised, slightly easing the pressure for construction firms, says the latest UK Tender Price Index compiled by BCIS, the Building Cost Information Service of RICS.

The price of new construction tenders fell a further 0.9 percent in the third quarter 2009, and now stands 12.2 percent down on the same time last year. BCIS predicts they have a further 4 percent to fall through 2010 before returning to growth in 2011.

The General Building Cost Index, also released today, remained virtually unchanged in the third quarter rising by only 0.4 percent. This follows two quarters of falling costs and over the year costs fell a total of one percent, the first year on year fall since the series started in 1978. This fall will bring a small amount of relief to the construction firms, who were suffering from annual rising costs of seven percent a year ago.

In terms of activity, the market is still quite weak which is helping to drive down tender prices. New orders for construction fell by one percent in Q3 and by three percent when compared with Q3 2008. New work output also continued to fall significantly, recording a drop of 13 percent when compared with the same period a year ago.

The drop in costs is due to falling material prices and a pay freeze for many construction workers. However falling costs will only bring limited relief as tender prices are expected to continue to fall through to the end of 2010 whilst demand remains weak."

Joe Martin, Executive Director of BCIS

* In total tender prices have now fallen 14 percent.

Further Reading:

The full report 'Indices and Forecasts' can be ordered online at www.bcis.co.uk/tpi