Following the general election result, it seems the government intends to continue spending on education, health and housing. For the construction industry, this means more City Academies, more private health-treatment centres and, with the announcement of the release of 96 NHS sites, thousands more starter homes. Construction output in the fourth quarter of 2004 was 1 per cent higher than in the previous quarter and 3 per cent up on the same period in 2003. Contractors are taking the opportunity provided by an active market to be more selective on tendering and increase their margins. Meanwhile, shortages of labour are causing further subcontract pressures on market prices. Tenders are expected to continue to outstrip retail price inflation and to rise nationally by 5 per cent in the year leading up to the second quarter of 2006, while in London tenders are forecast to rise by 6 per cent. A more constrained economic climate from then onwards is likely to be reflected in a slowdown in tender price rises. In the year to the second quarter of 2007, tender prices nationally are expected to rise by 3.3 per cent, with a 4.4 per cent increase in the capital.
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