£65M Carlisle link road is latest half-built road job to be paused due to cost hikes

The new 8km road is planned to connect junction 42 of the M6 with the A595 to the west, featuring four new roundabouts, five cycle bridges, four road bridges and a cycle path along the entirety of its northern side.

The project was initially advertised as a £75M contract in 2020, then the two-stage design and build contract was awarded to Morgan Sindall at £65M in March 2021. The contractor carried out stage 1’s enabling works in late 2021 and was expected to be given the green light to continue in spring this year.

However, Cumbria County Council has put a pause on proceedings. In a statement it says: “Due to the ongoing uncertainty associated with supply chains, the cost of construction materials and rising energy costs, caused by several factors including Brexit and Covid, and which is being exacerbated by events in Ukraine; Cumbria County Council's Cabinet deferred the decision to award the stage 2 build contract to Morgan Sindall at its meeting in March whilst the additional funding is being secured.

“The Council remains committed to finding a way to address these challenges and continues to be in intensive dialogue with Carlisle City Council and Government to continue to make progress with this multi-million-pound scheme which is vital for the growth of Carlisle and unlocking housing for St Cuthbert's Garden Village project.”

Cumbria County Council and Carlisle County Council have submitted requests for additional funding from government bodies including Homes England.

Along with the indefinite pause of the A361 North Devon Link Road and the re-tendering of Gloucestershire’s M5 junction, this is the latest in a spate of road schemes that have been waylaid by inflationary cost rises.

Construction labour inflation had reached 8.1% in the year to May, and building materials inflation had reached 27.2%. While these facts are affecting the whole industry, roads have been additionally hit by energy price rises due to the requirement for energy-intensive materials such as steel and oil-based commodities like bitumen.

Energy usually accounts for 25-33% of the cost of manufacturing energy-intensive materials. With the cost of commodities also rising, these increased materials prices are pushed on to the contractors. These firms must then increase their quote prices to cover the costs, which in turn leaves local authorities scrambling around for more funds.

Construction Products Association director of economics Noble Francis said: “This will increasingly become an issue as cost rises, from labour and particularly materials feed through to projects down in the ground and, critically, for clients procuring new projects and contractors bidding for new contracts given the uncertainty regarding future cost increases and project viability.

“From a contractor point of view, in the short-term it especially affects specialist sub-contractors that are fixed-price contracts that they signed up to 12 or more months ago as the cost increases since March couldn’t have been anticipated. In the medium-term it means that contractors will have to add fluctuation clauses and risk-sharing agreements with clients.

“From the client perspective, this means that they will have to devote more finance to projects given the extent of cost inflation coming through as margins in the construction supply will not be enough for main contractors and sub-contractors to take the hit.

“This is likely to be a major problem for public sector clients given that local authorities are already financially-constrained but it will also be a problem for central government departments given that HM Treasury has, so far, said that there will be no additional finance over and above what was announced in last year’s three-year Spending Review.”

ICE director of policy Chris Richards said: “The current high level of inflation is a new phenomenon for many of us in the developed world, and it is a challenge that can’t be addressed with any one solution, but rather needs a wide-ranging approach that includes better planning, ensuring that all the right parties are involved in planning, and innovating to find new solutions for the sector.

“All stakeholders involved in a project need to understand the relevant drivers and issues at the outset so they can work together to manage and allocate inflation risk collaboratively. More executive-level coordination between major projects could also help minimise peak demand for materials.

“Looking ahead long-term, the situation offers an opportunity for the sector to do things differently, e.g., by changing procurement approaches and applying Project 13 principles, involving the supply chain more in the planning process, and bundling contracts to create more certainty.”

Civil Engineering Contractors Association chief executive Alasdair Reisner added: “Like other parts of the construction sector, infrastructure is experiencing a period of very significant inflation. This is having an effect on affordability for projects across the UK. It is important to recognise that this inflation is driven by global factors and is not the fault of any individual part of the supply chain or our sector’s clients.

“All indications are that this issue is likely to affect projects for the medium term.

“As such it is essential that we continue to work collectively to understand, and where possible mitigate, this inflation.

“This may involve looking at the way projects are delivered and their scope to consider whether there may be options to deliver similar benefits in a more affordable manner.”

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