Predicting construction costs within the rail sector has become a much more difficult science during the past twelve months, according to an expert in rail costs

Michael Byng, head of the RICS rail strategy group, made the claim following an admission from the company building the Channel Tunnel Rail Link (CTRL) that the project is over budget. London and Continental Railways (LCR) has posted a loss of £585m for 2004.

Byng said: “Costs were very difficult to forecast in the past twelve months. It’s a world market now and everyone is facing the same pressure to find materials and resources.”

A key factor was China’s entry into the global market for steel, he said, which added 3% to UK steel prices last year. Byng said that the coke needed to make steel had become hard to find and the cost of concrete had inflated.

He also cited a “terrific skills shortage” in the UK rail construction sector as adding to the uncertainty over project costs.

LCR has a public-private partnership with the government and its largest shareholder is US construction giant, Bechtel. Its project manager and design team on the £5.2bn second phase of the CTRL, Rail Link Engineering, is a consortium made up of Arup, Bechtel, Halcrow and Systra.

LCR has blamed its problems on spiralling costs, which appear not to have been priced into the budget. It cited inflationary materials prices, especially steel costs, and skills shortages.

Source

QS News