AS WORK begins on Olympic facilities for 2012 it will become more difficult for other clients in London to find good quality managers, according to a report by cost consultant Davis Langdon.
The problem will be most pronounced in civil engineering and infrastructure projects such as the widening of the M25, due to start in 2008 and to last for 30 years, as Olympics will boost workload in the sector 55% from 2007 until 2012.
The report estimates that the value of major projects in London and the South-east, not including Olympic work, will be £9.4bn between 2007-2012, the same as for major projects from 2000-2007.
Under normal circumstances if these 2000-2007 schemes, such as Heathrow Terminal 5 in west London, White City in west London and Wembley stadium in north-west, were completed on schedule they would be replaced by other big non-Olympic projects, such as St Bartholomew's hospital and the Royal London Hospital in central London and work at Heathrow, creating a steady stream of work.
The problem arises because, if the Olympic Games projects are included in the mix, it will inevitably mean that resources are spread more thinly. This will drive up costs, including labour costs, and put a premium on finding good project managers.
The situation will not be helped by a strong workload in the regions, where there are hospital schemes in Manchester, Birmingham and Edinburgh, as well as retail schemes in Nottingham and Sheffield.
The impact in skills shortages and price rises is expected to be felt most keenly in infrastructure work rather than building.
The Olympic spend on civil engineering is estimated at £3.6bn, 55% of London's typical workload. This is likely to increase the cost of other large civils projects, including the East London River Crossing.
Civils spending is estimated at £3.6bn, 55% of London’s usual workload
General building work associated with the Olympics is estimated at £1.4bn over seven years, which equates to 2% of overall construction output in London.
In terms of building work the report says: "Although output may not grow faster than current trends, there will be a substantial number of projects chasing contractor ‘A-teams' over the next two to three years."
The Olympics is also expected to drive more development in the tourism and culture sectors. These projects are unlikely to have an impact on prices but the concern is that high-risk refurbishment projects or one-off cultural projects are less appealing, and may struggle to attract competitive bids.
Davis Langdon has estimated that the Olympics will add one to two percentage points to prices in the construction industry, with an average inflation rate of 6% from 2008 onwards. Outside London it has estimated that industry inflation will range between 4.5% and 5.5%.