Large scale public sector projects such as Crossrail and those linked to the 2012 Olympic Games, including the East London Line and Thameslink, are in danger of dipping further into the public purse due to significant increases in costs, according to the Civil Engineering Market report from RICS’; Building Cost Information Service (BCIS).

Raw materials and labour costs have risen by 12.2 percent over the past year and, with costs forecast to rise by a further 12 percent over the next two years, public sector project contingency plans will come under increasing pressure to stay out of the red.

With infrastructure output rising by eight percent and new orders growing at a rate of 26 percent in Q1 2008, this sector is expected to be one of the few growth areas in UK construction over the next few years, offering some firms an antidote to the current downturn in the market.

However, the rises in the costs of cement, steel piling and fuel are having a dramatic impact on civil engineering construction costs.

Joe Martin, Executive Director of BCIS says, "the industry is facing the possibility of a serious threat caused by a combination of rising costs and the economic downturn, that could result in delays and, at worst, cancellation of some of these schemes.”

Overall infrastructure output is predicted to rise by nine percent in 2008 and seven percent in 2009, while BCIS forecasts costs to continue to rise at a rate of 6.5 percent in 2008 and 6 percent in 2009.

While the public sector is usually well placed to handle and overcome economic down-cycles it is usually construction in smaller developments that suffer. Any slowdowns to large scale projects could deal a devastating blow to an already struggling construction industry.