Turner & Townsend raises inflation forecasts and urges clients to plan for resurgence

Turner & Townsend raises inflation forecasts and urges clients to plan for resurgence

Turner & Townsend is urging its clients to start proactively planning for a resurgence in construction activity, while also revising up its inflation forecasts for the UK industry.

The global professional services consultancy’s Spring 2024 UK Market Intelligence (UKMI) report highlights continued headwinds, with the UK in technical recession and facing the prospect of political uncertainty as the country prepares for a General Election later in the year.

However, it argues for investment decisions to be ‘made not delayed’, and for project teams to secure their supply chains to help tackle stubbornly high inflation.



The business has increased its 2024 tender price inflation forecast for real estate to 3.2%, up from the 2.7% it previously predicted in December. For infrastructure, meanwhile, the business’ forecast remains at 4.5%, though this is lower than 2023’s 5.5% and 10% in 2022.

These forecasts are in the context of the construction industry’s mixed outlook. In 2023 construction saw growth of 2% – far ahead of the 0.1% of the wider economy. Demand for new work in the sector has since weakened, with 2023 seeing the lowest rate of new orders since the onset of the global financial crisis in 2008.

Private housebuilding continues to be particularly affected by adverse economic conditions and higher interest rates impacting both development viability and sales, with activity in continual decline since Q2 2021. Industrial and commercial activity have also both contracted.

Despite this softening demand, Turner & Townsend’s forecasts point to costs remaining high. At the heart of this is both the high cost of borrowing, as well as a mismatch of the skills needed in the sector. While redundancies and unemployment have risen as demand falls, there are still acute specialist skills shortages, which are keeping labour costs elevated.



The consultancy predicts that better times for the sector are just around the corner. The current recession is due to be short-lived and shallow, and confidence and investment will increase as the Bank of England cuts interest rates in response to overall falling inflation.

Turner & Townsend is advising clients to secure and identify risk across the supply chain to make the most of the more positive conditions while mitigating the remaining challenges. The UKMI report points to strategies including undertaking robust procurement and pre-qualification checks to minimise the risk of contractor insolvencies impacting programmes. It also warns against the temptation to put too much contractual risk onto suppliers – instead working collaboratively to understand and share the potential impacts.

James Darrie, strategic lead for Scotland at Turner & Townsend, said: “While the construction sector is still facing a host of complex challenges, there is plenty of room for optimism across the region in 2024. Even as we head into a period of political and economic unknowns, built asset investment decisions are now being made, not delayed.

“This is not to say we’ve got an easy ride ahead of us. We still face structural issues, particularly the pressing skills shortage across Scotland. To ensure growth while prices remain high and the future uncertain, effective cost and project management will be crucial. The greatest exposure to political uncertainty will run through the supply chain – so businesses in Scotland need to better understand their suppliers to identify and share risk. New contracting strategies, more robust procurement, and careful apportioning of risk through project teams will be essential.”


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