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, according to the Civil Engineering Market report from RICS' Building Cost Information Service (BCIS).

Raw materials and labour costs have risen by 12.2% over the past year and, with costs forecast to rise by a further 12% over the next two years, public sector project contingency plans will come under increasing pressure to stay out of the red.


With infrastructure output rising by 8% and new orders growing at a rate of 26%, this 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 9% in 2008 and 7% in 2009, while BCIS forecasts costs to continue to rise at a rate of 6.5%t 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."

(CD/JM)