Inflation and skills shortages on the rise for London construction companies

Billy Bambrough
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London's Economic Boom Continues
London has been going through a construction boom in recent years (Source: Getty)

A growing skills shortage is causing London’s largest building contractors to turn down one in every two bidding opportunities, new data has revealed.

The survey from infrastructure and support services group AECOM estimates that construction costs have risen annually by 10 per cent during 2015, with predicted increases of seven per cent in 2016 before falling back to 5.5 per cent in 2017.

Some of the main contractors are now turning down 75 per cent of new business opportunities, the research found.

This is being largely blamed on soaring labour costs in the industry across the capital.

Due to skills shortages wages have risen by much as 15 per cent so far in 2015 for joinery work fitting-out prime London residential and office space.

Brian Smith, director of cost management at AECOM, said: “The industry is taking a far more strategic approach, targeting schemes that will deliver planned margins.”

“Risk appetite amongst contractors is low, with a desire for certainty meaning that projects may be taken on a smaller margin if the return is guaranteed,” Smith added.

Concerns about the stability of the London residential market are also forcing some firms to move away from house building in the capital.

The survey comes as chancellor George Osborne is pushing for a boost in house building around the country over the next few years.

The government has said it wants to accelerate house building to try and ease the shortage around the country.

Despite similar attempts over the last few years, the number of new homes registered in the three months to the end of September was two per cent lower than a year ago, according to the National House Building Council.

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