Construction Price Index for WASH approx 4.5 times higher than RPI, 1900-2020?

One of the challenges of making sense of the CapEx history figures shown in Franceys & Kayaga, 2025 (further details in earlier blog post, below), is the extent to which construction price inflation may have outrun consumer price inflation.

In the paper we explained that "The conversion factor is based on household consumption expenditure, as is the retail price index used for national inflation indexing. RPI and PPP indexing are not ideal for adjusting capital expenditure, but there is no long-run construction price indexing available at the national or intra-national level."

With the additional comments that "Considering the extent of service expansion of the infrastructure delivered in that first third of the time series (though with some ‘left behind’), one might wonder if those investment levels are under-reported by an order of magnitude."

We included an anecdotal reference to a significantly different cost base "the 1906 completed work on the 117km Elan Valley trunk main ‘was carried out at a time of high unemployment when would-be labourers flocked to work sites and those who were successful and who found work were content to work all day and sleep at night in the pipes which were waiting to be laid’ (Perret, J. in Thackray, 1977).

Having noted the possibility of 'an order of magnitude difference' we then showed the long-term trends with figures a & b differentiated with a 2.5x variation in the Y axis scale.

Since publication we have now come across an interesting reference point - from the 'LOCAL GOVERNMENT BOARD ENQUIRY' into an application for a loan from the Public Works Loans Board by Ampthill Urban District Council with respect to their (long) proposed (and long argued about) sewerage scheme.

The context was the loan request was for £6,100, slightly less that $1m in 2020 PPP prices, a substantial amount ($422 per person) for a town of 2,300 who would be taking on the burden of paying back the loan, interest and principal, over the following 30 years, therefore requiring an annual sum of almost $80 per household for capex recovery alone.

This amount had apparently doubled since the initial enquiry in 1894, the results of which were derailed by the conversion of Ampthill Local Board into the elected Ampthill Urban District Council  - a national requirement.

However the elections became as much about the costs of the proposed sewerage scheme than anything else - the 'progressive' 'advocates' for sewerage being replaced on the Council by the 'opposers' who did not want their local council taxes to increase so substantially.

When the richer elements of society, who under the progressive local taxation based on property values would pay disproportionally more, had the chance to make their voices heard …. They voted against.

Although there was an annual death-rate of 22 per 1,000 the Medical Officer of Health commented that "Out of the 51 deaths .... [there was] an unusually large proportion of deaths from old age and its concomitants." So not a water and sanitation problem the 'opposers' cried.

Getting at last to the purpose of this note, in the context of the arguments over costs of the proposed scheme "Mr Santo Crimp, a Westminster engineer" "said about £800 a mile for the sewers would be a fair cost for any adequate scheme."

£800/mile is equivalent to approximately $80 per metre in 2020 USD$ prices.

Today's prices for sewerage? The best approximation found to date is to take the Ofwat unit costs (Water and sewerage service unit costs and relative efficiency 2003-2004 report - the last time they reported in this manner) which are broken down to 'Sewer laying' for different 'nominal bores' (150mm to 450mm in 'Grassland', 'Rural/suburban highway' and 'Urban Highway'.

Taking a weighted average of pipe sizes in 'Rural/suburban highway' at the 'chosen benchmark level' the cost is approximately £180 per metre, $353 in 2020 prices. (The £180 benchmark figure was, in effect, the lowest costs of the range Ofwat was reporting on, the top of the range being 48% higher).

This is approximately 4.5 times higher than would have been expected using the consumer inflation index.

So, the 'feel' of an order of magnitude (10x) higher, the figures reported in graph form in the CapEx paper with a 2.5 times multiplier on the Y axis and one, relatively strong, indicator of actual costs for one element of WASH being 4.5 times higher between 1900 and 2003-04/2020.