Soaring energy costs have helped drive double-digit cost inflation for construction projects worldwide, a report by consultancy Arcadis has found.
The International Construction Costs report, which investigates the cost to build in 100 cities globally, found that London regained the top spot as the most expensive city to build in, followed by Geneva and Oslo. London stood at third place in 2019 behind both cities, although it held the title as most-expensive city as recently as 2020.
The report takes a deep dive into the inflationary pressures hitting construction projects, noting that many European and American cities have seen double-digit price growth.
Other UK cities in the top 100 include Bristol (11), Manchester (14), Liverpool (16), Edinburgh (17), Cardiff (18) and Glasgow (22). Birmingham is considered the cheapest city in Great Britain to develop, at 25th. Belfast in Northern Ireland stands in 36th place.
The report states that 2021 saw two waves of inflation: “The first wave arrived in the second quarter of 2021, driven by an increase in commodity prices – copper recorded a 70 per cent increase; aluminium was up by almost 40 per cent compared to pre-pandemic levels; and iron ore more than doubled in price, sending the cost of steel to a historic high.
“But from a price-inflation perspective, the top spot was taken by timber. Due to a boom in the US housing sector, along with rampant demand from the home-improvement market, this more than tripled in price.”
The report notes that the sector has yet to see the impact of increased labour costs on construction, which may yet feed through over the course of 2022.
Andy Beard, global head of cost and commercial management at Arcadis, said: “Construction has proved itself extremely robust during the last year in adapting to the most difficult of circumstances.
“Sustained delivery of housing and infrastructure, better use of data and increasing investment in technological solutions such as modern methods of construction can both improve efficiency and aid the drive to net-zero [carbon emissions].
“This adaptability will prove vital as businesses ready themselves for the uncertain and inflationary environment ahead. While on the surface the looming market conditions sound unfavourable, we believe these challenges, more than ever, present our industry with a great opportunity to drive forward innovation and cement a mentality of doing more with less to reduce our own impact on resource use and the environment.”