Executive Summary:

Tender price index
Building prices in Greater London rose steadily in 2007 and ended the year 6% up on the previous year. Most regions had a similar rate of inflation. The faltering economy may eventually cut private sector construction but prices are forecast to rise by 4-7% in 2008.

Building cost index
The building cost index rose 4.9% over the year to the fourth quarter 2007, the lowest annualised figure since early 2004. It is forecast to rise again over the next year as higher labour awards are implemented in the latter half of the year.

Retail prices index
The retail prices index (RPI) ended the year registering a 4% annual inflation rate, a similar level to the past six months, but double that recorded by the consumer prices index. RPI is forecast to fall to 2.5% by the end of 2008.