14 August 2008 | Paul Snell
The increasing cost of raw materials and labour in the construction industry could damage the progress of public sector building projects.
According to the latest figures from the Royal Institute of Chartered Surveyors (RICS), projects such as the 2012 Olympics and London's Crossrail development might have to use more public money to meet rising costs.
RICS said costs had risen by 12.2 per cent in the past 12 months, and predicted that high prices, particularly in areas such as cement, steel piling and fuel, would contribute to another 12 per cent rise over the next two years.
Joe Martin, executive director of RICS' Building Cost Information Service, said the civil engineering sector was well placed to "ride out" a downturn, but warned: "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."
In the latest CIPS/Markit Purchasing Managers' Index for construction, activity in the civil engineering sector recorded a figure of 46.5 in July, indicating contraction. However, this was a more positive result than the figure of 40 recorded for June.
Input prices reached a "severe" 79, although they were slightly down compared with the previous month's record high of 81.1.