The RICS has cast further doubt on the viability of the £16bn Crossrail project with a warning that spiralling construction costs could lead to the cancellation of large public infrastructure projects.
The institute’s Building Cost Information Service today warned that raw materials and labour costs have risen by 12.2% over the past year and were forecast to rise by a further 12.5% over the next two years.
Construction work on Crossrail is due to begin in 2010, but last week fears were raised that Heathrow owner BAA, the City of London Corporation and the Greater London Authority had yet to publicly commit to raising £4.1bn towards the cost of the east-west London rail link.
Experts warned the deal could unravel, leading to delays of up to five years, although Transport for London insisted the funding was secure.
However, the BCIS report warned rises in the costs of cement, steel piling and fuel meant sector project contingency plans, including those for the East London Line and Thameslink, would come under increasing pressure to stay out of the red.
It said overall infrastructure output is predicted to rise by 9% in 2008 and 7% in 2009, matched by a rise in costs 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, which could result in delays and, at worst, cancellation of some of these schemes.”
Crossrail, which will run from Maidenhead and Heathrow in the west out to Shenfield and Abbey Wood in the east, received royal assent July.
The project would unlock major commercial development around a string of prime London station sites including Great Portland Estates’ 18-19 Hanover Square, Grosvenor’s 65 Davies Street; and Derwent Valley’s land around Tottenham Court Road station.
