Government may have to plough in extra cash to fund major infastructure projects such as Crossrail and the 2012 Olympics

The government may have to put up extra cash for large-scale public sector infrastructure projects like the £16bn Crossrail and those linked to the 2012 Olympics due to significant increases in costs, industry economists have warned.

aquatics centre
Groundworks on the 2012 site

A report by the RICS’ Building Cost Information Service (BCIS) published today shows raw materials and labour costs have risen by 12.2% over the past year and costs are forecast to rise by a further 12% over the next two years.

Infrastructure output rose by 8% and new orders by 26% in Q1 2008, with the sector expected to be one of the few growth areas in UK construction over the next few years. However, the rises in the costs of cement, steel piling and fuel are having a dramatic impact on civil engineering construction costs.

Overall infrastructure output is predicted to rise by 9% in 2008 and 7% in 2009, while BCIS forecasts costs to continue to rise at a rate of 6.5% in 2008 and 6% in 2009.

Joe Martin, executive director of BCIS said: “With large projects in rail, roads, electricity, water and sewerage all scheduled over the next two years, the civil engineering sector seems well placed to ride out the current economic downturn. However, the industry is facing the possibility of a serious threat caused by a combination of rising costs and the economic downturn, that could result in delays and, at worst, cancellation of some of these schemes.”