Oct 12 2006
Increased energy prices are threatening the number of schools and hospitals being built in the UK. A survey by the Construction Products Association (CPA) has highlighted the continuing pressure on construction costs as a result of escalating energy prices. The survey shows that product manufacturers and suppliers have experienced an average increase of 37% in gas prices and 42% in electricity prices over the last 12 months.
Commenting on the findings of the survey, the Association’s Chief Executive, Michael Ankers said: "The direct impact of the increase in energy prices has been to add £1.6bn to the cost of construction products. The impact of this is being felt across the whole of the construction industry. UK companies have also experienced far sharper increases in energy prices than their competitors on the continent, and whilst we may have started from a price advantage, we are now paying more for energy than many of these companies overseas and this is having an adverse effect on the competitiveness of companies in the UK".
Looking to the future, the survey showed that companies in the construction products sector are anticipating further increases in energy prices over the next 12 months, with gas prices expected to increase by a further 21% and electricity by some 13%.
Explaining this, Mr Ankers went on to say: "Although energy prices have moderated slightly in recent weeks, what many people forget is that there are still companies who have been on long term contracts that are facing sharp price increases as these contracts come to an end. As a result the pressure on the industry will continue over the coming winter, with further significant increases in the price of construction products, adding some £800m to construction costs.
"Spiralling energy prices are set to add £2.4bn to the cost of construction in this country over a two year period, 40% of which falls directly on the public sector as the industry’s major client. This extra cost to the Exchequer is equivalent to the cost of building 17 major hospitals, 65 schools in the Building Schools for the Future programme, or 11,000 new social homes.
"The impact of this on the Government’s programme for schools, hospitals, social housing, and improvements to the transport network is something that the Government will have to consider very carefully as it begins to put together next year’s Comprehensive Spending Review."