Major transport improvements and developments tied into the 2012 Olympics could be under threat because of soaring building costs, according to new figures from the Royal Institution of Chartered Surveyors (RICS).

The surveyors’ latest snapshot of building costs said civil engineering costs had risen by more than 12 per cent in the first half of 2008 and are forecast to climb a further 12 per cent in the next year.

Higher material and fuel prices have been the biggest factor behind the soaring costs of building. Cement prices have risen by 11 per cent in the past year, while coated macadam and bitumen products have risen by 13 per cent and steel piling by 9 per cent.

Meanwhile, a 45 per cent increase in the cost of gas oil and a 20 per cent increase in diesel have also had a dramatic impact on construction costs.

The soaring costs mean that major infrastructure and transport projects, which are largely funded by the public purse, could be put on the back burner or even cancelled.

Joe Martin, director of the RICS’s Building Cost Information Service, said: “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.”

“No-one predicted inflation at these levels and some projects may have to be scaled back,” Mr Martin said. He suggested that proposed motorway widening schemes may be scaled back in favour of using the hard shoulder as an extra lane, to save public money.

“There are already arguments about who will pay for major infrastructure work such as Crossrail and those debates are likely to increase as budgets climb,” Mr Martin said.

Soaring prices could be disastrous for the entire construction sector as public sector construction work has provided one of the few areas of growth in the sector, since the severe slowdown in housebuilding triggered by the credit crunch.

While construction activity has been falling overall, overall output from infrastructure is expected to grow by 9 per cent this year, and 7 per cent next year.

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