Inflation adds £20m to cost of new link road between Colchester and Tendring
Essex County Council has asked the government for help to make up the shortfall
A shortfall of more than £20m for a new link road to support a new 9,000- home development between Colchester and Tendring could widen with as yet no guarantee the money will be made up from central Government.
Essex County Council has not only asked the Government for an additional £21m to be released to pay for the increased costs of the new A133/A120 link road east of Colchester but for the deadline for completion to be extended to August 2025 – the contract with the Government had stipulated the road had to be completed by 2024.
In addition, the additional funding request of £21.13m and funding extension to October 2025 assumes that a Public Inquiry (PI) is not required for this project.
With prices rising at the fastest rate for 40 years, additional cost pressures are likely to come from spiralling inflation which has now hit 9.1 per cent.
The government had allocated £99m of Housing Infrastructure Fund money for the delivery of the link road and a rapid transport system to enable the development of a 9,000-home garden town on the Tendring and Colchester border.
The county council – which gave planning permission for the road at the time costed at £70m in November 2021 – has admitted there is a risk that Homes England and the Treasury will not be willing to fund the cost escalation of £21.25m in full or are not willing to the full programme extension.
A time extension is a separate risk to the £21.25m cost escalation, as the county council is currently unable to draw down funding beyond March 31 2024 under the terms of the Grant Determination Agreement.
The authority has also added that additional risks beyond the £21.25m have been identified and should these materialise the funding gap may widen.
Essex County Council is currently negotiating with several landowners and if a public inquiry is necessary to resolve those issues, the programme would be extended by an estimated period of 12 months with costs increasing significantly owing to materials increases and inflation.
The slippage in the programme would “reprofile” expenditure further beyond the current Homes England funding deadline, resulting in an increased risk of additional grant shortfalls unless an extension was granted.
Essex County Council has said it would again need to seek a programme extension or consider alternative approaches to funding unless there was a significant reduction in scope.
It adds that “potential inflationary risks” beyond the £21.13m have been identified and should these materialise the funding gap may widen.
Specifically, land acquisition is ongoing and therefore further costs may be incurred in finalising negotiations.
Should land be acquired late there is a risk that this will delay the overall construction programme and may result in additional mitigation works, this could lead to increased costs “that are not currently quantifiable”.
It adds that any delay may also place further pressure on the Homes England funding deadline.
Councillor Lesley Wagland, cabinet member for economic renewal, infrastructure and planning said at Essex County Council cabinet: “From Essex’s point of view we have a strong track record of negotiating these with local landowners in a way which produces a mutually satisfactory response and I see no reason why that shouldn’t be the case here.”
She added: “In terms of there being a funding gap it is something which we’re looking at against the background of slightly different financial and economic parameters but I have to say that again in 40 years of experience I’ve met several of those – 1989 springs to mind but also probably 2008 as two that were particularly difficult and these sorts of shortfalls are dealt with in the way that we are dealing with them.
“So in my book we are dealing with this in a perfectly proper way in order to secure an end result that will be satisfactory.”