Construction Costs: Will the M.O.D Continue to Invest Heavily in Construction?
- Holly Thompsett
- September 26, 2022
- 12:00 pm
The cost of building in the United Kingdom has risen 25 per cent over the past year. Construction costs of everything from timber to bricks, steel and concrete, have shot through the roof.
This is a nightmare for the construction industry. However, it is also of concern to those that depend on construction. This includes politicians in charge of public spending whose budgets face high inflation.
In recent years, the UK government has placed a particular focus on a massive upgrade to its infrastructure. This includes defence infrastructure, which relies heavily on the construction industry.
As a business owner, you may wonder if defence construction contracts will start to disappear given the current economic climate.
In this article, we will examine the relationship between defence and the construction industry. Keep reading to understand whether the government is likely to continue to invest in construction.
How the Defence Ministry Relies on the Construction Industry
The UK Defence ministry owns 1.4 per cent of the country’s landmass, making it one of its largest landowners. It also owns land and property in several overseas locations.
The ministry of defence uses the land at its disposal for the critical task of training the armed forces, housing them, and running the military. Keeping military infrastructure up to date and in good condition is crucial for the defence of the country.
Some of the property owned by the ministry of defence includes:
- 4,000 sites around the world
- 424,000 hectares of land
- Almost 50,000 service family homes
- Training estates in five countries
- Medical centres
- Logistics and storage facilities
- Hangars and airfields
- Naval bases and ports
The Defence Infrastructure Organisation (DIO) is responsible for managing these sites. It spends around three billion pounds annually on the upkeep of the country’s defence infrastructure.
The construction industry is vital to the ministry of defence. It handles building new military housing, administrative centres, training facilities, and other infrastructure.
Here are some examples of recent defence construction projects and contracts:
- Five new military accommodation contracts
- Four accommodation maintenance contracts
- Training facility for submariners
- Refurbished Royal Navy jetty
- Airbase infrastructure upgrades
- Construction of communications facility
The UK’s national security depends on the smooth running of the infrastructure that supports the armed forces. This makes the construction industry an essential partner in the security of the country.
However, the construction industry as a whole is facing jitters because of a grim global economic situation.
What Is Happening With Construction Costs?
The UK construction industry is facing several challenges at once.
On the one hand, construction material costs have been increasing for the past few years. This was a result of supply chain issues that began after Brexit and got worse because of the COVID-19 pandemic.
Because demand remains steady, this led to a massive backlog in deliveries. Another major impact of the shortages was substantial price increases in materials. This has also added to the boom in the construction cost of buildings.
This year, an increase in inflation, energy prices, and the crisis in Ukraine made the construction price situation worse.
Labour costs have also soared. This is due to a significant lack of builders and other skilled workers. And this is a problem which has been growing for years. Part of the problem is that many in the industry are reaching retirement age, and there has not been enough effort to attract younger candidates.
Still, many experts are optimistic about the industry’s growth as the demand for construction continues to rise.
What Will Happen to Construction Investment?
The ministry of defence has yet to announce a slowdown in its ambitions to upgrade its infrastructure.
However, in its latest Strategy for Defence Infrastructure, the ministry admits that budget pressures make it hard to reach its goals.
The UK defence ministry has laid out plans to reduce the infrastructure and property it owns. Many of its assets are old and run-down and no longer suited to the smaller army of recent years.
However, there is still plenty of work to be done. The ministry plans to upgrade and transform much of its estate, making it more environmentally sustainable. A major goal is to improve the quality of housing for the armed forces.
The goal is modern building designs to fit into a warming climate and put renewable energy front and centre.
The Ministry of Defence has already received an increase in funding of over 24 billion pounds over the coming years. Much of the desire to boost defence funding comes from a changing global situation, including the war in Ukraine.
Experts are warning that inflation will eat into much of the increased spending.
However, the ministry has also highlighted that the increase in the budget shows its commitment to funding critical infrastructure.
While the situation is uncertain, it is clear the ministry still has a massive budget for construction contracts. The best way to stay on top of developments is to sign up for a service to receive alerts on the latest government contracts.
How to Find Defence Construction Tenders
The world is going through uncertain times. Between the war in Ukraine, supply chain issues, and sky-high inflation, everyone is holding their breath.
There is no doubt that the construction industry is challenging, but there are still opportunities. Government and industry workers must learn to adapt to the changing business environment to reach their goals.
Construction costs are not a barrier to doing business with the defence ministry.
Register for free with Supply2Defence for the latest construction tenders and advice on how to apply.
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