London remains the fifth most expensive city in the world to build in, behind New York, San Francisco, Hong Kong and Zurich, according to a report from consultancy Turner and Townsend.
The report found that construction costs in London are set to rise 2.8 per cent in 2018 compared to 3.9 per cent in 2017, and that construction costs in the capital are 27.7 per cent higher than the UK average.
Across the UK, meanwhile, the study found that labour costs have risen by 3.1 per cent, with London being the most expensive place to secure construction workers.
According to the report, a key driver behind the ongoing increase in building costs across the country is an acute skills shortage that ensures “workers continue to command a premium”.
Steve McGuckin, global head of client programmes at Turner and Townsend said that fundamental changes were needed in the UK to control costs:
“In the UK the skills challenge continues to contribute to cost inflation. We need to adopt digital tools, modern manufacturing methods and automation if we are to ease the pressure on resources and help attract new talent to our dynamic sector.
“We need a fundamental shake up of the industry model to incentivise this investment, otherwise there is every excuse not to change.”
New York City remains the most expensive location in which to build, with the average cost of construction in the city climbing 3.5 percent to US$3,900 (£2,787) per square metre in 2018.
Globally, Turner and Townsend’s survey forecasts that construction costs will rise 4.3 per cent over the next year.