Hampshire County Council set to lose £4.5m in one year due to inflation costs in construction industry

For months, Hampshire County Council has been wrestling with the rising inflation rate in construction materials - which currently sits at around 17 per cent.

As a result, council officers believe they will lose up to £4.5m in the next 12 months alone, with materials needed for projects such as the construction of Welborne School in Fareham and the Botley bypass.

In a recent report, the county council's director of economy, transport and environment, Stuart Jarvis, claimed a number of issues were to blame.

He said: 'The current situation in eastern Europe has resulted in significant and rapid increases in the cost of oil, gas and energy which have impacted manufacturing and global supply chains.

'These were already in a state of managed recovery following the impacts of Brexit and Covid-19.

'The total estimated pressure on the highways maintenance service for the financial year 2022/23 could be in the region of £3-4.5m, and possibly higher as the situation is still evolving.

'This includes an additional £1m revenue pressure for routine and cyclic operations that will also be impacted by rising costs.'

To offset the losses, Hampshire County Council is redirecting £3.5m of revenue from the structural maintenance programme.

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It is hoped that this will be a one-off payment, but officers admit that the full impact of the war in Ukraine remains untold.

Mr Jarvis added: 'The Ukraine situation is already impacting national, international and pan-European material supply lines, particularly for bituminous-based products, but all areas of construction activity are currently experiencing volatile changes in prices, costs and risk profiles.

'In a worst-case scenario this has the potential to have a greater financial impact on the delivery of the highway maintenance service than the Covid pandemic did.

'The duration of the current situation is unknown, which will ultimately increase the risk profile of highway maintenance activities still further, and also impact unit prices. Oil and gas prices are unstable and rising rapidly, and this directly affects fuel, energy, manufacturing, and also overhead costs.'