Price escalation clauses in construction contracts

The aftermath of a global pandemic has led to cost uncertainty in the construction industry, exacerbated by ongoing global conflict, surging global energy prices, sanctions, Brexit, and a looming recession. In particular, the knock-on effects of a downturn in the current economic climate have presented themselves in the form of increased costs of materials due to material shortages and longer lead delivery times, reduced workforces, and supply chain issues. The ban around the use of red diesel in heavy construction plant machinery in 2022 has also contributed to making projects more costly for contractors to deliver. Additionally, surging rates of inflation in the UK and other developed economies have prompted the Bank of England to repeatedly raise interest rates during 2022, raising the costs of borrowing for parties looking to fund construction projects by way of debt financing.

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