Devolution is driving investment in cities like Manchester and Birmingham while construction costs in London are set to ease this year, a global analyst has concluded.
Leeds-based Turner & Townsend today publishes its International Construction Market Survey for 2018 and shows that a two-tier construction market is in play across the UK, with London’s construction costs 27.7 per cent higher than the UK average.
The global construction consultancy firm said construction costs in London are set to rise 2.8 per cent in 2018 compared to 3.9 per cent in 2017.
Labour costs across the UK as a whole have risen by 3.1 per cent, with London being the most expensive place to secure labour. On average, labour costs in the capital are now £34.00 per hour.
Overall, London remains fifth most expensive place to build, behind New York, San Francisco, Hong Kong and Zurich.
Elsewhere in the UK, Turner & Townsend said that there are signs that devolution is supporting investment hot spots by driving spending on infrastructure and housing.
A flurry of developer activity in key cities including Manchester and Birmingham – especially on the back of High Speed 2 in Birmingham – is contributing to rising construction costs across both regions, it said.
Both cities, along with the Tees Valley and Liverpool have secured devolution deals with Sheffield the only city region in the nation to have done so, albeit with slimmed down powers following collapse in support for the deal.
A key driver behind ongoing inflation across the UK remains persistent capacity constraints, linked to acute skills shortages that ensure workers continue to command a premium. The survey finds that across the UK, labour costs have increased by 3.1 per cent to an average of £27.90 per hour.
Steve McGuckin, pictured, global head of client programmes at Turner & Townsend, said: “Global GDP growth of 3.9 per cent is driving a resurgence in construction activity across international markets.
“While this uptick will inevitably push up costs, inflation is being exacerbated by skills shortages: put simply, we need to do more work with fewer workers.
“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.”
Turner & Townsend has teams in 46 global markets.