Spiralling inflation presents a “significant and growing risk” for major council building projects across York as the costs of some materials are rising by more than 20 per cent.
Senior council officers have warned that councillors may have to decide whether some projects can still go ahead as prices continue to rise.
City of York Council has embarked on a number of large-scale projects over the last few years and anything that is not yet under contract is at risk of having to be reconsidered, according to corporate director of place, Neil Ferris.
“The situation is going to get worse,” he told a meeting of the customer and corporate services scrutiny management committee. “The sheer scale of what we can do with our revenue account and our capital account is reducing daily.”
An update on all major council projects, such as York Central, Castle Gateway, York Station Gateway and the anti-terror barriers, was provided to councillors. While none are deemed to be at the highest-risk ‘red’ level, cost and resources have been highlighted as a concern across many projects.
Tracey Carter, director of housing, economy and regeneration, said there was “extreme reluctance” from contractors to offer fixed-price contracts.
She added: “There may be other projects where the inflationary aspects exceed the revenue budgets or the capital budgets that we put to one side and we need to bring it back to executive and full council to reconsider the business case for that.”
Out of kilter
One unnamed project is now in danger of being “out of kilter”, Ms Carter said, as inflation had now overtaken rent income.
Coun Martin Rowley asked officers which projects specifically were in danger.
Mr Ferris said: “Everything that isn’t in contract is at risk of having to either come back and be reconsidered or postponed, because if it’s not in contract, we’ve not got an agreed price.
“There’s an awful lot of the capital programme that is subject to those final decisions.”
Ms Carter said: “It is not just about the availability of materials or cost of materials, it’s the availability of resources and the capacity within the sector to respond to tenders and provide accurate costs that can be relied upon.”
Council documents show that, while the Castle Gateway project remains within budget, there is still uncertainty about timescales and build costs.
York Station Gateway is one of only two council projects deemed to have increased in risk since March.
“Current cost planning shows that the scheme can be delivered within the agreed funding profile, however current domestic and world events may mean costs could escalate,” a council report stated.