Over the next two years, cities in the UK are set to see the cost of construction rise, as labour shortages and disruption to supply chains from Covid-19 are exacerbated by a Government agenda focussing investment outside the South

The International Construction Market Survey (ICMS), published by Turner & Townsend, forecasts that rising prices being seen in the global construction sector will be sustained through 2022 and into 2023.

Cost inflation in the UK is expected to rise to 4.0% by 2023 – exceeding forecasts for Europe, North America, Australasia, the Middle East and Asia.

London (£2,326 per sqm), which ranked third in 2019’s report, has fallen out of the top five in the global rankings to eighth place behind Geneva, Zurich, and Boston. But, Bristol (16th), Birmingham (19th), Manchester (24th), Newcastle (29th) and Glasgow (30th) all place in the top thirty globally, with Edinburgh (32nd) and Leeds (33rd) close behind.

All of these cities now rank as more expensive to build in than key global markets such as Paris and Singapore.

Tokyo is now the most expensive city in the world to build in, with an average cost of £2,906 per sqm, followed by Hong Kong (£2,828 per sqm) and San Francisco (£2,701 per sqm).

Global cost increases are being driven by rising material costs and skilled labour shortages – both exacerbated in the UK by Brexit and the government’s ambitious programme of investment to ‘level up’ the economy after the pandemic.

The average hourly construction wage in London has now hit £37.3, above the UK average of £33.0.

Demand for steel, softwood and copper piping have seen prices rise sharply over the year, with increases of up to 40% seen in some international cities, including Birmingham.

Major disruptions to the supply chain

Neil Bullen, managing director of global real estate at Turner & Townsend, said: “Capacity constraints around the availability of skilled labour and disruptions to the supply chain are already providing significant inflationary pressure – and this is only going to be heightened in the coming months and years as we focus on building back better from the pandemic.

“It is more important now than ever that the industry embraces wholesale reform and invests in data, technology and improving productivity to help tackle costs and make savings where we can to remain competitive.

“This will complement the steps many businesses are already taking to diversify global supply chains and get closer to their suppliers – moving from a ‘just in time’ to ‘just in case’ approach to delivery.”

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