The strength of the pound and currency devaluations in many emerging economies have propelled the UK up the rankings in terms of construction costs – putting it in the same price bracket as Austria, Germany and Belgium.
The research into construction costs in 43 worldwide locations by international consultant Arcadis shows that Denmark, Switzerland, Hong Kong and Sweden are still the four most expensive countries in which to build.
But Arcadis also says that demand for residential and commercial projects in the central London market have given it the world’s most expensive building sites – far outstripping the rest of the UK and the four league-topping countries.
The report says: “This reflects the very high specification levels seen in many London developments and the fact that the UK construction industry has never been as productive as its US and European peers.”
The comparative cost assessment is based on a survey undertaken by Arcadis of construction costs in 43 locations, covering 13 building types. Costs are representative of the local specification used to meet market need.
The research shows that construction costs in India, Indonesia, Malaysia, Thailand and Vietnam are now all less than 35% of typical UK levels when costs are compared on the basis of a common currency.
Relative costs in Japan have fallen significantly due to continued devaluation of the yen.
Meanwhile, the report predicts that worldwide commodity prices will remain low, which will limit growth in construction cost inflation across most global markets.
Copper and steel prices fell in 2014, while the price of iron ore – one of the raw materials in steel – dropped by 40%, mainly due to low growth in China.
But the most notable slump was in the price of Brent crude oil, with further falls forecast for 2015, which has impacted on the price of many manufactured products in the sector.
An additional consequence pointed out in the report is that a trading price of $55 a barrel could curtail the spending plans of clients from oil-producing countries. Among the OPEC members, it says that Abu Dhabi, Qatar and Saudi Arabia are the best placed to be able to continue to fund budget commitments, but there would be increasing pressure on public spending in 2015.
International Cost Comparison (Indexation based on UK = 100)
Source: Arcadis
