London is world’s fifth most expensive city for construction despite the pound’s Brexit slump

Of the 43 regions and cities examined in the annual report, only New York, San Francisco, Zurich and Hong Kong were found to be more expensive than London

London took third spot in last year’s survey (Reuters)

Despite a dramatic slump in the value of the pound since Britain’s vote to leave the EU, London remains the world’s fifth most expensive city for commercial and residential construction, according to a new study.

The average cost of construction in the UK capital is now at $3,214 per square metre. And that figures is set to rise a further 4.1 per cent in 2017, on robust demand for infrastructure work and intense competition for scarce labour, according to the survey conducted by professional services company Turner & Townsend.

Of the 43 regions and cities examined in the annual report, only New York, San Francisco, Zurich and Hong Kong were found to be more expensive than London.

London took third spot in last year’s survey and likely would have scored higher this year had the pound not suffered an approximate 13 per cent slump against the dollar in the aftermath of the Brexit vote.

In New York, construction now costs an average of just shy of $3,807 per square metre, outpacing San Francisco where the bill hit just over $3,549 this year. In Zurich the cost amounted to $3,527.87 per square metre and in Hong Kong $3,487.82.

Globally, construction cost inflation for 2016 hit 3.7 per cent, compared to 2.9 per cent in 2015, and Turner & Townsend said that growing skills shortage was a significant driver of that.

Half of the world’s construction markets, including London, are suffering from labour shortages, the report shows, only four cities included in the survey – Muscat, Perth, Santiago and Sao Paulo – reported a skills labour surplus.

“It is clear that construction is not doing nearly enough to tackle this issue, which if not addressed has the potential to become a crisis,” said Steve McGuckin, global managing director for real estate at the firm.

A report earlier this year by the Royal Institution of Chartered Surveyors predicted that almost 200,000 construction jobs could be slashed if Britain loses access to the European single market, dealing a sharp blow to major UK cities’ global competitiveness.

The report found that 8 per cent of the UK’s construction workers are EU nationals and that access to the European single market is critical to their continued employment.