A new report from Turner & Townsend has ranked London to be the fifth most expensive place to build globally at an average cost of £4,163 per m2
The report, Global Construction Market Intelligence (GCMI) 2025, has revealed that costs are expected to increase by 3% for the remainder of this year and by a further 3.5% in 2026.
Due to the surge in demand for construction, driven by the government’s targets, London construction costs have risen to rival those of popular European areas, such as Zurich or Geneva.
Skills shortages
The report highlights that while demand is rising in the UK construction sector, capacity is not increasing to meet the challenge, with the skills shortage being the key reason.
It also states that the skills shortage is only going to become more apparent with contractors and specialists working to capitalise on their investments in the public and private sectors. Mechanical, engineering, and plumbing specialists (MEP) are a key example of a profession becoming increasingly rare, as all UK markets report that an MEP specialist is difficult to find.
Bristol is experiencing rising construction costs
Writing for PBC Today, Brian Smith, head of cost management at AECOM, discusses a similar issue.
London is not the only place where costs are rising, with Bristol seeing an inflation rise from 3% in 2024 to 5% in 2025. Bristol sees struggles to supply key construction tools, for example, it currently takes 26 weeks to procure a generator.
In Bristol, the average construction cost is £2,588 per square meter, rivalling Berlin and surpassing Paris and Amsterdam.
“We’re far from firing on all cylinders”
Chris Sargent, UK managing director, real estate, at Turner & Townsend, said: “The government has set out welcome, ambitious plans to renew our country’s economic growth but we know budgets are expected to remain squeezed and, in terms of construction’s capacity, we’re far from firing on all cylinders. Concerted efforts to improve efficiency will be crucial. There’s exciting potential, for example, for public programmes like the New Hospitals Programme, which is underpinned by Modern Methods of Construction (MMC), to drive the pace of wider modernisation across the industry, and we should grasp this opportunity with both hands.
“The government’s consideration of public-private partnerships to fuel projects like public estate decarbonisation, as announced in the Infrastructure Strategy, will also be important to bridge the funding gap and work towards Labour’s missions while balancing restricted departmental spending.
“For the industry, we now need to capitalise on the renewed clarity from government – to ensure that private investment is working hand in hand with public money and that we are delivering outcomes which will continue to build confidence in construction. This is key to enabling the development of the skills and productivity gains we need to restart the engine of growth.”
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