Pressure on margins intensifies

Published:  19 May, 2011

LONDON: Two-thirds of contractors cut tender prices during the first quarter of 2011 as suicide bidding continues to sweep the industry, says the Construction Products Association in its latest survey.

 

"The weakness of demand ensured that the industry remained highly competitive in 2011 Q1, exerting further downward pressure on tender prices, according to 63%, on balance, of building contractors," the survey says.

"Only 5% of building contractors were able to raise tender prices in 2011 Q1, compared with 2010 Q4, while a significant 68% shaved tender prices down further in an attempt to secure work.

"A combination of rising costs and falling tender prices put profit margins under further pressure," the survey says.

Construction firms are gloomy about future prospects as spending cuts bite and material price inflation hits home despite the survey showing that construction output grew during the first three months of the year.

Noble Francis, economics director at the Construction Products Association says: "The industry's near term future is likely to be extremely challenging with domestic demand remaining subdued, exacerbated by expectations of further rises in fuel, energy and materials costs."

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