Bosses must stay calm in face of soaring inflation, says leading figure at Turner & Townsend

Soaring inflation in the UK construction sector exacerbated by the conflict in Ukraine means that businesses should focus on securing a resilient supply chain, according to a study by Turner & Townsend.

The global professional services business’ latest UK Market Intelligence Report (UKMI) shows significant upward revisions to its quarterly forecasts, particularly the inflationary predictions for 2022.

This is driven by rapidly rising energy costs as the impact of the war in Ukraine has an impact throughout global supply chains.

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Michael Grace, director and Yorkshire strategic lead at Turner & Townsend, said: “Now is the time for calm, clear and programmatic thinking, focusing on setting up projects for success with full recognition of challenging cost pressures and a plan to manage them that starts with getting the basics right."

A spokesman said: “Turner & Townsend’s central forecasts for tender price rises in 2022 now sit at 8.5 percent for real estate and 6.0 percent for infrastructure, much higher than that of the winter 2021/22 predictions of 4.5 and 4.0 percent for the same period.

“The Ukraine conflict has had a significant near-term impact on inflation, but these exceptional conditions come on top of layers of issues including pandemic and Brexit disruption.

“Despite relatively little direct reliance on oil and gas imports from Russia, the nature of the global market means that elevated energy prices are at the heart of the latest spike, with monthly indices for crude oil, diesel and premium unleaded increasing by 99.4, 33.8 and 30.5 percent month on year in March alone.

“This has impacted logistics costs as well as materials with energy-intensive manufacture processes such as brick, cement and steel.”

The new UKMI report argues that businesses must keep ‘cool heads’ in the face of these pressures and calls for pragmatic, flexible procurement and greater collaboration with the supply chain.

The statement added: “Turner & Townsend also warns that the major risk to the industry as a whole is that inflation distracts from the vital work being done by businesses to achieve and target wider goals such as Net Zero, driving productivity gains or embedding social value into their operations.”

Michael Grace, director and Yorkshire strategic lead at Turner & Townsend, said: “Now is the time for calm, clear and programmatic thinking, focusing on setting up projects for success with full recognition of challenging cost pressures and a plan to manage them that starts with getting the basics right.

He added: “Contract scrutiny needs to be front and centre. Businesses in Yorkshire must avoid panicked procurement in the hope of locking-in pricing, instead taking time to eliminate ambiguity that can be a bigger risk than inflation itself.”