Maintenance costs set to rise

Maintenance costs set to rise

Keywords Building,Maintenance

Maintenance costs generally rose by less than the prevailing rate of general inflation in 1997. However, increasing pressure on wages is likely to cause maintenance prices,across all sectors, to rise considerably faster in 1998, according to a report issued by Building Maintenance Information (BMI).

The BMI All-in Maintenance Cost Index rose 2.7 per cent in the year to fourth quarter 1997, maintenance materials rose 2.1 per cent and retail prices 3.7 per cent over the same period. The phasing of the 1997 health service wage award, the low level of settlement in the local authority sector and a modest rise in materials prices was offset to some extent by private sector wage awards.

The BMI forecast is for maintenance costs generally to rise 4.2 per cent in the year to fourth quarter 1998 (see Table V and Figure 2).

The phasing of the 1997 health service award will take its full effect in the first quarter 1998. It is assumed that the 1998 award will reflect the current level of general inflation and be paid in full in April 1998. It is further assumed that local authority operatives will receive a similar increase also in April 1998.

Building craft operatives will receive an additional 13.9 per cent on the basic wage rate in June 1998. However, consolidation of plus rates and additional payments into the basic wage rate may result in a somewhat lower net increase.

BMI comment that "If the skill shortages which are being reported in the new build sector continue in 1998, this will start to affect the availability of staff for maintenance contracts. This will in turn put pressure on margins in existing maintenance term contracts which will show through when new contracts are tendered".

Figure 2 Maintenance cost inflation (annual percentage change)

The BMI Quarterly Briefing of Maintenance Costs is available as part of the BMI Subscription Service or individually priced £65.00.