Some major projects in Cornwall could be 'scaled back' due to rising construction costs
The council has already had to cut some elements of the St Austell to A30 link road and the Penzance Creative Cluster will also be reviewed
Last updated 19th Jun 2022
Cornwall councillors have been warned that some major projects could have to be scaled back or scrapped due to rising construction costs.
With inflation hitting all industries the authority has seen the cost of building projects increase dramatically in recent months.
As a result the council has already had to scale back some elements of the St Austell to A30 link road project and has warned that other projects, including the Penzance Creative Cluster development, will also be reviewed.
A report that went to the council’s Cabinet on Wednesday laid bare the extent of the issue, stating that the council had gone back to the Government to ask for additional funding to cover a rise in project costs for the A30 link road.
The scheme was recently approved by the Government which will provide £78million for the new road.
However, when the council asked for more money to cover the additional costs of the scheme the Government refused, instead the cost will fall on the council.
The council has also said that some elements of the project, including traffic calming in nearby villages, may now be scrapped due to financial pressures.
The report to Cabinet states: "An assessment of the inflation effects of two years on the contractor's price and changes in the law has been made and mitigated as far as possible, but this created an overall cost increase. The Government was asked to fund this uplift, but at a meeting of their Investment Committee on 14th April this was not supported.
"The Government has asked the Council to meet the price increase which we have agreed as a priority within the highway’s capital programme. There is also some reduction in scope and deferment of complementary works until after scheme delivery which reduces the amount of budget pressure for the main works and minimises the financial pressure on the Council".
The Local Democracy Reporting Service asked the council how much the additional costs were but the council did not comment. We also asked about what "reduction in scope and deferment of complementary works" would impact.
In response the council said: "Through commercial discussions with our contractor, we have been able to maintain the integrity of the main scheme and keep the forecast cost within our overall budget.
"The reference to reduction in scope relates to complementary measures, such as traffic calming in surrounding villages and roads, which will not now form part of this funding programme.
"However, the council will be monitoring the effect of the new road when it opens and remains committed to delivering appropriate complementary measures, if required, within the funding available at that time".
The council was also asked about the wider impact of cost increases on projects, it said: "We aim to ensure that all our projects make reasonable allowances for cost increases. However, the whole construction industry is experiencing an impact due to issues such as rising fuel costs, resulting in unprecedented cost increases that could not have been anticipated therefore the Council’s capital programme is under review".
At a meeting of the council’s economic growth and development overview and scrutiny committee on Wednesday councillors raised concerns about the rising cost of construction on council projects.
Tim Dwelly asked whether the council had factored in extra costs due to the rise in construction costs into current capital projects, such as the Penzance Creative industry workspace and Liskeard Cattle Market.
He said: "The figures do not reflect the working costs that this council is finding. Are we going to find the money to do these (projects)?"
Phil Mason, strategic director for sustainable growth and development, said: "Money is the key in terms of the extra costs in construction, you are right to say that projects are coming in more expensive than we anticipated when we set those projects up".
Mr Mason explained that the council’s outcome delivery board would make decisions on how the council proceeds, adding: "We will look at a scheme if it has gone up and look at how much that is, is it value for money and do we want to go on with it. Cabinet, squarely, will be making those judgements with the outcome delivery board".
But Mr Mason warned that the council could not just keep increasing the size of its capital programme to cover projects which had already started as there was a need to fund new projects as well.