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London borough confirms some projects ‘unlikely to be deliverable’ due to volatile economy
Some of the Royal Borough of Kensington and Chelsea’s (RBKC) housebuilding and stock investment plans may be delayed or cancelled because of the “extreme volatility within the UK economy”, the council has said.
In a report that outlined the impact of economic uncertainties on the council’s housing plans, RBKC said its capital projects “are unlikely to be deliverable” as currently scoped and budgeted.
COVID-19, Brexit and the war in Ukraine are among the factors it said have led to increased energy prices, soaring inflation and a materials shortage.
The report, which recently went in front of the council’s housing select committee, pointed to forecasts by the Building Cost Information Service that suggested tender prices will increase by between 15% and 17% in the current financial year.
It said market uncertainty has made the pricing of work “complicated” and fewer companies are providing tenders for capital projects, which include new-build housing and stock-investment programmes.
In 2018, RBKC committed to building 600 homes across the borough, with at least 50% for social rent. Construction is underway on some sites, while work on others is due to start “imminently”.
The council has also committed to spending £460m on a stock-investment programme over nine years.
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RBKC is in the process of assessing the full impact of current and expected market conditions on the programmes of work being delivered “so we can assess the scale of the challenge”.
The council’s housing revenue account business plan and its new-homes programme are being reviewed “to consider what measures we can take to bring these programmes back into a deliverable position”.
This will include options for securing additional funding and driving down costs through “ever-more efficient approaches to procurement”.
“However, given the scale of the challenge, we will at least have to consider more challenging options, for example in reprofiling/delaying some works, changing the scope of works, or pausing/cancelling some projects altogether,” the report said.
Any decisions on projects are likely to take place during the remainder of 2022/23, according to the report.
“Though given the unpredictability of the medium-to-long-term economic outlook, the position will need to be kept under constant review for the months, and maybe years, ahead,” it added.
A spokesperson for RBKC said increasing inflation and costs are a “factor for everyone involved in building new homes”. They said the council is “constantly reviewing” its plans, to ensure it delivers “much-needed homes for ... residents in the most cost-effective way possible”.
“Cancelling projects will always be a last resort, especially for something like our new-homes delivery programme, which is one of this council’s highest priorities.
“We remain committed to our new-homes delivery programme, which aims to build 600 new homes in the borough, half of which are for social rent. The first 98 of those homes will be delivered by spring next year,” they said.
Last week, Sadiq Khan, the mayor of London, told Inside Housing that the government should reconsider grant rates for new-build housing, because of soaring inflation.
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