The UK is considered one of the most expensive places in the world to build, emphasising the pressing need for innovation investment. In addition, London specifically has emerged as the most expensive city in which to build real estate and infrastructure¹. Recent data suggests that UK building costs will continue to rise by 17% over the next five years, while tender prices will increase by 19% over the same period². Economic pressures stemming from skills and labour shortages, the cost of borrowing and fluctuating material costs are some of the drivers reinforcing the challenges faced by clients. Geopolitical factors have also exacerbated these cost challenges, making it difficult for clients to maintain value for money and achieve business case outcomes.

In today’s market, the stakes for successful project delivery have never been higher. The commercial impact of getting the delivery wrong is therefore substantial. There have been numerous calls in recent years for the UK to get better at driving down costs and ensuring major projects deliver better value. Increasingly, we have seen a drive to reduce costs as a top priority for client c-suites within the UK³.

However, the UK isn’t alone in facing these challenges. Strikingly, a recent global survey with over 700 participants suggests that only 47% of major infrastructure projects are meeting their time, cost, and quality objectives⁴. Consequently, the impact to broader society can be wide ranging from social, environmental, and economic benefits not being realised through to supply chain insolvencies and job losses.

Deloitte has identified several key warning signs to help clients diagnose a major programme in commercial distress. These warning signs can often be subtle and build gradually, making early detection critical in proactively mitigating the risk of failure. To help clients navigate these complex issues, we have published an interactive PDF exploring the warning signs of major programmes in commercial distress. The report provides insights into the measures clients can adopt to mitigate these challenges, focusing on programme structure and operations. Click here to access this valuable resource and learn more.

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References 

1 London ranks as most expensive city for construction | Arcadis

2 Construction Industry Forecast | BCIS

3 Deloitte UK Economics and Markets Team, trends analysis 2024

4 Assystem 2023/24 PMO insights report: PMO Insights Report 2023 - Assystem