EU funded bypass project hit by Brexit-driven construction costs hike

Gareth Wyn Williams, local democracy reporter

A delayed multi-million pound bypass project partly paid for by EU funds has been hit by rising costs due to Brexit and the pandemic, councillors in Gwynedd have been told.

Across the construction sector, builders have reported struggles with completing jobs at their quoted price due to the soaring costs of materials, with labour shortages also reported in the wake of the pandemic, Brexit, and the current energy crisis.

But with Gwynedd Council’s Chief Executive confirming that the authority was reviewing capital projects with the possibility that some will be delayed until prices have stabilised, it has also caused headaches for one of the biggest proposed projects in the county.

Despite EU funding and planning permission being secured, starting work on the £14m Llanbedr bypass was paused in June following a Welsh Government decision to halt  all new road building schemes while a review is carried out.

The decision, with the reduction of carbon emissions in mind, has affected several other projects in the region including the proposed Deeside “Red Route” and a proposed new Menai crossing.

Climate change minister, Lee Waters, confirmed in September that Llanbedr would be “fast-tracked” by the independent committee tasked with the final decision, which is made up of transport and climate change experts.

But Thursday saw Gwynedd Audit Committee members told that the nationwide building issues have also taken their toll, with concerns that even the £7.5m of European Regional Development Funding could be an issue if delays persist.

Due to the volume of traffic heading towards Mochras (Shell Island), congestion has long been a problem in parts of the A496 which runs through the Meirionnydd village of Llanbedr, with calls for a solution dating back over 50 years.

There are hopes that the 1.5km  bypass will also improve access to Llanbedr Airfield – also known as Snowdonia Aerospace Centre – and currently used for testing and developing unmanned drone aircraft for civilian use.

Dafydd L Edwards, the authority’s Chief Finance Officer, said: “Planning isn’t an problem and money has been earmarked for the various aspects of the project.

“However, the Welsh Government has announced it is reviewing all road building projects, which is understandable due to what’s going on with climate change.

“They have agreed to fast-track (a decision on) Llanbedr so that we don’t lose the EU funding and officers have met the independent chair of the panel and we are waiting for a decision over the coming weeks.

“If a decision is made we can proceed without losing the grants, but the delays have raised other risks such as the increased costs by now.
“There’s been a rise in material costs and we need to discuss with the Government how we close that gap.”

‘Costs higher’

A separate report, presented to the cabinet on Tuesday, confirmed that the authority intends to spend £71.6m on capital projects during 2021/22, with £26.1m of it (37%) being financed by attracting specific grants.

Among earmarked projects is a start on a new primary school building to replace the ageing Ysgol Treferthyr in Criccieth, cash towards the ‘Nyth’ project in Bangor, transport and projects associated with its £77m housing action plan which includes new builds as well as bringing empty properties back into use.

But the Chief Executive, Dafydd Gibbard, also added that it “made no sense” to proceed with some – unnamed – projects until the market had stabilised.

“There are issues in Gwynedd like every other area in the northern region, certainly,” said Mr Gibbard on Tuesday.

“We’re seeing an impact on building tenders with costs being substantially higher than budgets and the kind of prices we were basing them on a year ago.

“Forecasts suggest this will be a temporary issue so in some cases we’ve decided to hold projects back, it doesn’t make sense to accept tenders of up to 70% higher than they were a year or two ago, and we live in hope there will be a restoration to normality over the year.

“Until then we will prioritise and hold some back.”

‘Review’

The most recent Purchasing Managers Index (PMI) of industry activity found that construction has been hit by “rapid cost inflation” due to “a severe lack of materials” and staff shortages.

Having been hampered by material shortages since last year, the latest Department for Business, Energy and Industrial Strategy data shows that key material costs across the sector were 23.5% higher in August 2021 than the same time 12 months ago.

A Gwynedd Council spokesperson said: “Rising costs in capital projects is a matter that public bodies across the country continue to monitor closely.

“In terms of the Llanbedr project, we await further details from the Welsh Government regarding their ongoing review of road projects, and will be better placed to consider any possible rise in potential costs with all funding partners at that time.”