The average cost of construction in central London now exceeds that in Switzerland, making it the most expensive construction market in the world.
Cost inflation helped to drive the UK to become the 8th most expensive construction market in the world, according to the 2014 International Construction Costs Report, released by Arcadis.
The report, which benchmarks building costs in 43 countries worldwide, shows that the strength of the Sterling in relation to the Euro has led to a significant increase in costs in the UK construction market.
When viewed in isolation, central London ranks at the top in the relative cost league, reflecting the high specification levels seen in many London developments.
High costs in London also reflect an acceleration of client demand, particularly in prime residential, which is reaching a capacity ceiling, according to the report.
In the rankings of construction costs by country, Switzerland still sits at number one, with Denmark and Hong Kong at number two and three respectively.
Globally, India ranks as the least expensive country for construction; costs in countries such as India, Indonesia, Malaysia, Thailand and Vietnam are now around 35 per cent lower than in the UK.
European countries dominate the top 10, with those such as Germany (9th) and France (6th) gradually translating into contractors demanding more for their services in these markets.
Commenting on the results, Arcadis head of strategic research Simon Rawlinson said: “The cost of construction in London has been heavily impacted by high specification levels in many of the city’s developments, topped off by the fact that its prime residential property is reaching a capacity ceiling, leading to significant cost inflation over the past year.
“This is bolstered by the UK construction industry being much less productive than its US and European peers and the fluctuation in global currencies, especially the strength of the Sterling relative to the Euro.
“Given that this is unlikely to cease, the UK is forecast to grow around 3 per cent in 2015.”