Building work in Ibiza

Building companies have been incurring losses. | Irene Arango

Andrew EdePalma30/06/2023 07:24
TW
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Over the first six months of this year, 55 tenders for public building works in the Balearics were abandoned because valuations made by public authorities failed to take sufficient account of the cost of materials. The value placed on these 55 projects amounted to 47 million euros. These were more than half the number that were abandoned in 2022 for the same cost reason - 96 at a total value of 90 million euros.

The construction industry maintains that the real cost of works has risen by some 30%, the consequence of the rise in energy costs and, in particular, the increased cost of materials brought about by the war in Ukraine.

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Tenders for building work failing because of inflation

Sandra Verger of the builders association says that tenders are not being updated and are therefore at values lower than the real market price. She adds that public authorities, such as town halls, are failing to respond to an industry call for upward revaluations and points out that companies have incurred losses because there haven't been budget adjustments. An exception, she notes, has been the Balearic government's Ibavi housing agency.

Last November, the government announced that there would be a mechanism for "partially" adjusting budgets. In line with measures adopted by the Spanish government, this was nevertheless criticised for having been insufficient by the National Construction Confederation.