The head of the Latvian Construction Contractors Partnership, Gints Mikelsons, mentioned that the construction industry is now experiencing hard times, the cost of building materials increased by 6.1% compared to 2020. Mikelsons also noted that some of the contracts were signed earlier, when prices for building materials had not yet risen. And now, when construction work on government purchases should begin, which accounts for at least half of the builders' portfolio, companies will incur huge losses, including bankruptcies, as prices for building materials for some items have increased by 200%.
Concerned about the situation, members of the Latvian Construction Contractors Partnership wrote a letter to the Ministry of Economy and Finance, asking for help in solving the problem with already concluded contracts. According to the authors of the letter, it is necessary to develop a mechanism at the level of regulatory acts, so that in the event of an increase in construction costs due to circumstances beyond the control of construction companies, prices may be revised.
Mikelsons believes that the need for a price indexation solution is proved by the very rapid price hikes that have occurred in Latvia several times over the past 20 years. As a result, in the absence of an opportunity to agree on changes in the contract price, several large state construction contracts were canceled, new purchases were announced, in which the customer was later nevertheless forced to pay the current market price.
Mikelsons does not exclude that there will be builders this year who will terminate the contract if the price cannot be changed.
