Construction industry costs hit by Aggregates Tax

The introduction of the Aggregates Tax and changes to the Building Regulations could add to underlying rates of inflation, increasing construction tender prices substantially during the first half of 2002.

This is according to the latest forecast published by international consultancy EC Harris, which indicates that while the underlying rate of inflation in tender prices is forecast at 2.7% nationally over the next twelve months, it has been estimated that the introduction of the Aggregates Tax has added approximately 1% to contractors' costs for building work. This is a figure which could be passed on directly in the form of higher tender prices.

It is also likely that clients' costs will rise due to the changes to part 'L' of the Building Regulations. The changes, which aim to make buildings more energy efficient, apply to all works commencing on-site from the 1 April 2002.

The costs of complying with these new regulations has been variously calculated as adding a further 2-5% to the building costs. However, despite increasing capital costs, the changes in the Building Regulations should produce buildings which could typically generate savings of up to 40% on current energy costs

In Northern Ireland, greater levels of workload and higher input costs will lead to an estimated rise of 1.5% and 2.5% over the next two years.

Commenting in the figures, Jim McClean, partner in EC Harris' Northern Ireland office, said: "Contrary to the indictors in September 2001, the construction industry appears to have survived the turn of the year without going into recession and contractors remain generally busy."

(CL)