Findings from infrastructure consultancy Arcadis’s annual International Construction Costs Index report has highlighted that the soaring costs of land and construction in the capital are leading to delayed projects starts as contractors become increasingly nervous.
The report has found that London London was the second most expensive city in the world for construction, behind New York, amongst 44 cities which were analysed.
Reasons which are thought to have contributed to delayed project starts include the city having a limited pool of specialists and opportunism, causing inflation; a rise in supply chain insolvencies and associated problems such as cash flow failures are causing clients to become nervous; and inflated construction costs and high land values.
Client Development Director at Arcadis, Simon Light, commented: “In London, the synchronised recovery is losing momentum.
“Delayed investment decisions are reducing actual workload and we are seeing early signs of a return to reason in procurement.
“There is now much more focus on agreeing prices prior to starting on site, ensuring no loss of value should current construction volumes be maintained.
“We expect to see the rate of inflation fall to 4-5% in London for 2016 and for a real opportunity to ‘reset the dial’ on projects coming forward in 2016 and 2017.”
Despite the problems mentioned, the report said that London still remains attractive to international investors, although interest is peaking amongst lower value areas of the city, and is extending to other cities such as Manchester and Birmingham.
