Large-scale public sector infrastructure projects could face delay or cancellation due to ‘significant’ increases in costs, according to RICS’ Building Cost Information Service (BCIS). Spiralling raw materials and labour costs will put increasing pressure on projects including Crossrail and Olympic-related schemes to stay out of the red, the latest BCIS civil engineering market report warns. Projects such as the Birmingham Private Finance Initiative highways deal could also be affected. Raw materials and labour costs have risen by 12.2% over the past year, and are forecast to rise by a further 12% over the next few years. Labour and plant costs continued to rise at about the rate of inflation in the second quarter of 2008, but heavy side materials and fuel prices have been the main cost drivers. The rises in the cost of fuel – 45% for gas oil – have had a ‘dramatic’ impact on construction costs, according to the report. Provisional figures from the Civil Engineering Contractors’ Association also reveal an increase in firms suffering from the skills shortage – 50% of respondents reported an unsatisfactory supply of skilled labour and 69% reported difficulties in obtaining staff. The supply of specialist labour could be further strained by the expected growth in demand for civil engineering work over the next few years, but slow down in other sectors, such as housing, could ease the supply of general construction labour. Yet, despite predicted growth in the sector over the next few years, the threat of delays to some projects due to funding constraints is a real concern, the report warns. 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.’ : http://www.bcis.co.uk/