New study reveals that construction costs in London are the highest in Europe and second highest in the world.

New study reveals that construction costs in London are the highest in Europe and second highest in the world.

Arcadis’ annual International Construction Costs Index report details the relative cost of building in 44 of the world’s major cities.

According to the report, New York, London and Hong Kong are the most expensive locations for construction in the world.

The report argues that price inflation in the UK and US is beginning to threaten the viability of commercial and public sector schemes. This is challenging the ability of New York, London and other cities to respond to growth opportunities.

Arcadis goes on to argue that London is facing a severe imbalance in the construction market. As the capacity of contractors fails to keep up with demand, the inflation cost is being heavily pushed by a complicated combination of limited resources in bidding and opportunism from suppliers.

In some areas of the market accurately predicting the prices of construction has become near impossible. This is due to the rapid rise in labour costs and overheads.

Although stable material costs have taken some steam out of the market, rapid inflation affecting the cost of labour and on-costs such as profit margins, mean that accurately predicting prices has become near-impossible in some areas of the market.

Signs are appearing of a rise in insolvencies in supply chains. Issues becoming more widespread are cash-flow failures, problem projects and a lack of control over the supply chain.

These factors in turn reduce the certainty of delivery.

The report goes on to say that ‘…despite growing costs for non-sterling investors, the London market is now highly geared to international investors, a demand trend that is moving out to lower-value, less mainstream areas of the city’.