Builder & Engineer: 2012 Olympics will increase construction costs

According to analysts, the huge demand for construction will have knock-on effects in the wider construction industry, pushing up inflation by 1 to 1.5 per cent each year until the 2012 Olympics have been held.

As a result it will increase the costs of public buildings, potentially affecting plans for new schools, NHS units and GP surgeries.

Policy analyst Matthew Sinclair told B&E that one reason why inflation will rocket is because the Olympics is short-term demand and as a construction firm you’re not going to want to increase capacity to respond to it because it’s gone in a few years.

He said: “Increasing the cost of construction in London and the South East is not only hazardous to the health of the British economy but also imperils the objective of getting enough new homes built to make things easier for first time buyers. The bigger the bill for the Olympics becomes, the more damaging this knock-on hidden cost will be.”

The report also calculates that the increase in construction costs between now and 2012 will be felt in a number of areas leading to: a 1.5bn increase in the cost of private commercial buildings, new office and retail; £921m increase in the cost of building private housing; £640m increase in the cost of public buildings and a £237m increase in the cost of building public housing.