Olympics 'to raise building costs'

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Construction inflation is one of the biggest "hidden costs" of the London Games and it is set to rise by £3.9 billion in total by 2012, according to the Taxpayers' Alliance (TPA).

A massive injection of public money saw bulldozers start to clear the Olympic Park site in Stratford, east London, last month.

The impact of construction inflation in London and the South East could be to increase the cost of new public buildings such as city academies and GP surgeries and new private housing, making affordability even worse for first time buyers, according to the TPA.

It could also make new social housing more expensive in every London borough, it was claimed.

Construction and regeneration costs for the Olympic Delivery Authority now stand at £5.3 billion. The huge demand for construction this represents will have knock-on effects in the wider construction industry, pushing up construction inflation each year until the Games have been held.

For new construction orders in this region, which are expected to reach well in excess of £10 billion by 2012, this will mean substantially higher prices for buyers.

If the Olympics adds 1.25% to construction inflation each year between now and 2012, the increased cost of construction orders that can be linked to the London Olympics will reach £3.9 billion in total.

The TPA calculates the Olympics could see a £1.5 billion increase in the cost of private commercial buildings, new office and retail space and a £921 million increase in the cost of building private housing, potentially adding to house price inflation in London.

It predicted a £640 million increase in the cost of public buildings, potentially affecting plans for new schools, NHS units and GP surgeries and a £444 million increase in the cost of infrastructure work, without factoring in large potential projects such as Crossrail.