Large-scale public sector projects such as Crossrail and those linked to the 2012 Olympic Games, including the East London Line and Thameslink, are in danger of dipping further into the public purse due to significant increases in costs.
Raw materials and labour costs have risen by 12.2 per cent over the past year and, with costs forecast to rise by a further 12 per cent over the next two years, public sector project contingency plans will come under pressure to stay out of the red.
With infrastructure output rising by eight per cent and new orders growing at a rate of 26 per cent in Q1 2008, the sector is expected to be one of the few growth areas in UK construction over the next few years, offering some firms an antidote to the current downturn in the market.
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 nine per cent in 2008 and seven per cent in 2009, while BCIS forecasts costs to continue to rise at a rate of 6.5 per cent in 2008 and six per cent 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, which could result in delays and, at worst, cancellation of some of these schemes.’