Gardiner & Theobald cools inflation fears over Olympic project costs

Gardiner & Theobald has advised the industry not to “panic” about the impact of Olympic building projects on the cost and availability of resources. The firm said the impact would be restricted to projects within a 50-mile radius of the games, where inflation of tender prices caused by the extra workload would be less than 1% above normal inflation.

The overall cost of investment in buildings in the Lower Lea Valley and transport systems will be £8bn. But of this, £6bn is going on transport and has already been committed, since it was to take place with or without the Olympics, according to G&T. Of the remaining £2bn earmarked for buildings, £1bn worth of work, again, would be going ahead anyway. This means the industry is experiencing a “surprise” cash injection of only £1bn, G&T said.

Tony Burton, partner at G&T, said: “This is certainly a sizeable project but the industry in the South East has already accommodated projects of this size without blinking.”

He added that a number of major construction projects in the region were finishing soon, freeing up skills and sources of materials. These projects include the Channel Tunnel Rail Link, Terminal 5, the West Coast Main Line and Wembley Stadium.

He also stressed that construction for the games was “a seven year building programme with different schemes coming on stream gradually”.

The South East has already accommodated projects of this size without blinking

Tony Burton, G&T partner

Burton conceded that there are insufficient skills in the South East at present to carry out the Olympic work, but he argued that they would easily be drafted in from Europe. All Olympic projects will be tendered across the EU.

Burton also admitted that there would be some strain on local projects using the same materials as those of the Olympic works. These are likely to include concrete, steel, air conditioning and electrical items. Burton said that it was up to suppliers to invest in capacity to meet the demand Other firms anticipate a stronger impact. EC Harris has said that the South East would see tender price inflation of 1 to 1.5% extra, while Davis Langdon said costs could go up by up to 2%.

Reuel Abrams, associate at EC Harris, said price inflation would be limited because while a shortage of supply would drive up prices, competition to be an Olympic supplier or contractor would keep a check on this.