Avoid Costly Mistakes: Understanding A Project’s Full Financial Commitment

Table of Contents

    Introduction to Construction Project Costs

    Starting any building project, whether it’s a small extension or a million pound new build, represents a significant investment of time, energy, and money. Understanding the financial commitment involved is crucial to reduce the worry and strain of unexpected costs and ensure smooth sailing of your project. The successful realisation of your vision starts with understanding your needs and defining a realistic budget.

    If you’ve ever watched a home renovation show, you’ll know that when asked whether the project came in over or under budget, the invariable answer is it cost a lot more than originally intended. We are here to reassure you that this does not have to be the case! In this article we’ll go through the costs involved in your architectural project and tips on how you can stop your budget from spiralling out of control.

    So without further ado we’ll list the construction project costs you need to consider when defining your budget:

      1. Construction costs, including materials and labour.
      2. Professional fees, including Architects, Structural Engineers, and all other consultants.
      3. Statutory charges, including application fees, levies, etc.
      4. VAT rates.
      5. Your Contingency pot!

    Construction Costs

    Image of a construction site.

    We’ll go for the big one first. Construction costs are ever changing and therefore hard to pin down, especially at the outset of a project that may not get to site for a year – or more if you subscribe to the Cornish ideal of doing things ‘dreckly’, which is to say very slowly.

    Luckily, there are ways to gauge the likely outlay at all stages of the project:

      • Initial Appraisal
      • Concept Design
      • Technical Design
      • Tender/Construction

    Initial Appraisal

    Before starting your project, we can carry out an Initial Appraisal. As part of this, we provide you with a ballpark estimate based on the likely square metreage of your proposal and the current median cost of construction for your type of project.

    Concept Design

    Once we have pined down a concept design, or various options, based on your brief, we can engage a Cost Consultant to give us a more defined estimate of costs based on the actual design.

    Technical Design

    Once the technical aspects of the design have been agreed and accepted by Building Control, we can then engage a Quantity Surveyor, who will give a more defined cost for the works.


    Finally, once the tender package has been prepared for construction, we can request definitive tender prices from contractors. Even if the price of the build comes back too high at this stage, there is no need to panic, we can provide Cost Engineering services to help you reduce costs.

    Professional Fees

    Next, you should consider professional fees. With ever tightening regulations, the demand for professional services is increasing, and this can be a big hit on budget, particularly for small projects. On average, you are looking at around 25-30% of the construction budget again for professional fees, with Architectural fees being a significant portion of that. This may be less if a Planning or Building Regulations application is not needed, as there are often reports and surveys needed for these that otherwise aren’t required. However, for complex sites with small construction budgets, it could be more.

    The good news is that any good Architect will advise you on the likely reports and surveys required for your project near the outset, so you can plan for these costs.

    Key consultants that are often required include:

      • Your Architect, who will co-ordinate with all other collaborators on your behalf.
      • Topographical Surveyor
      • Ecologist
      • Arboriculturist
      • Structural Engineer
      • Party Wall Surveyor
      • Conservation/Heritage Consultant
      • Planning Consultant
      • Energy Assessor
      • Quantity Surveyor
      • Highway Consultant
      • Mining and Contamination Specialist
      • M+E Consultant (Mechanical and Electrical)

    Statutory Charges

    It is often necessary to gain Planning and/or Building Regulations approval before starting works, but these aren’t the only statutory charges to take into consideration. You should be aware of:

      • The Community Infrastructure Levy (CIL). Luckily, there are exemptions that include extensions under 100sqm, or when you will live in the property as your main residence for 3 years following approval and as such it often doesn’t effect homeowners.
      • Section 106 and 111 Agreements. These agreements are drawn up during the Planning process by the local planning authority.
      • Biodiversity Net Gain credits. This does not apply to householder applications such as house alterations or extensions, and can be mitigated by providing new habitat onsite where it does apply.

    You should consider these if they are likely to impact your project. If you are unsure, it is best to instruct us to prepare an Initial Appraisal for your project so we can advise you on what statutory charges may apply.

    VAT Rates

    For a lot of works, VAT is chargeable at the current government rate on all service and construction costs. However, for some types of project, this is cut to 5% or is even zero rated to incentivize works. The caveat being that this is only for construction costs and does not include professional or other fees.

    Based on HMRC’s guidance, zero rated projects include:

      • Building a new house or flat.
      • Work for disabled people.

    And reduced rate projects include:

      • Upgrades to qualifying energy-saving products and certain mobility aids for people over 60.
      • Conversion from one residential use to another.
      • Renovating a residential building that’s been empty for two years or more.

    If you are unsure if your project qualifies for reduced or zero-rated VAT, HMRC offers a free VAT helpline. They also publish guidance on VAT for construction work.

    Contingency Pot

    Money inside a change jar for construction project costs contingency pot.

    The final thing you should consider is your contingency pot. The bigger you can make this pot, the better, but we advise our clients to aim for at least 10% of their construction budget so they are ready for any hidden costs that may crop up. While we always give an indication of additional costs that will be required as part of the process, the results of various reports or surveys may mean further investigations or mitigation measures are necessary, and these will come with a cost. In addition to this, regulation changes can have costs associated with them.


    The answer to, “How much will my construction project cost?” depends very much on the specific project. If you are at all unsure if your budget is realistic for the project you are envisioning, we advise giving us a call to discuss our Initial Appraisal service.

    This will give you an idea of a ballpark construction cost for your project, additional consultants that are required, applications that need to be submitted, and any landscape constraints that may have an impact on your budget. The cost of this service starts at only £450 + VAT + disbursements. We keep the cost of this service as low as we can to avoid a large financial commitment while you are still considering your options regarding your construction project costs.

    Leave a Reply

    Your email address will not be published. Required fields are marked *