For anyone with a refurbishment, a block repair programme or a development about to go to tender, the result of the referendum on 23 June 2016 probably raised questions. The pound fell sharply when the result was announced, and nobody could yet say what leaving the European Union would mean for trade, materials or the construction workforce. Uncertainty is uncomfortable, but it can be managed.
Where the pressure might come from
- Imported materials. Many building products and components are bought from abroad, so a weaker pound could feed through into prices over the following months.
- Labour. Construction in London and the South East relies on workers from across Europe. Any change in their availability would affect costs and programmes.
- Confidence. Some clients might pause projects, which could ease demand in the short term. Others would press on. Nobody knew yet which effect would be stronger.
What to do with a project in hand
- Do not panic. A sound project remains sound. Repairs that are needed now will not become cheaper by waiting, and deterioration carries its own cost.
- Review the contingency. Make sure the budget has a sensible allowance for price movement, especially on items with a high imported content.
- Think about fluctuations. On a longer contract, decide whether the contractor or the client should carry the risk of price changes, and choose the contract terms accordingly.
- Watch tender validity. Ask tenderers to hold their prices for a stated period and make your decision within it.
- Order early where it matters. Long lead items can be identified at design stage and secured before prices move.
For leaseholders and managing agents
Where a programme is funded through the service charge, explaining the position early helps. A clear estimate, with the contingency and its purpose explained, gives leaseholders confidence that costs are being managed rather than simply passed on.
Keeping control
A well prepared tender, a properly chosen contract and regular valuations on site are the best protection against an uncertain market. Clarity at the start makes it far easier to manage change later.
Our Major Works and Contract Administration services cover tender, contract and cost control. See how we took 26 apartments from tender to final account.