London construction costs rank fifth highest globally

Image: Timothy Batchelder on Unsplash

11 JUL 2025

LONDON CONSTRUCTION COSTS RANK FIFTH HIGHEST GLOBALLY

London has been ranked the fifth most expensive place to build globally in a new report by professional services company Turner & Townsend.

At an average cost of £4,163 per m2 and fuelled by fresh demand for construction, costs in the capital are now on a par with Europe’s most expensive markets Zurich and Geneva – both £4,164 per m2.

Turner & Townsend’s Global Construction Market Intelligence (GCMI) report 2025 points towards mounting pressure on construction’s already stretched capacity as the UK government seeks to encourage economic growth through investment in key sectors such as life sciences, industrial and advanced manufacturing.

This skills shortage is set to become more acute as contractors and specialists work to capitalise on investment – both public and private – into adjacent sectors such as infrastructure and energy and natural resources. Mechanical, engineering and plumbing (MEP) specialists, needed for the renewed industrial push across the country, are particularly scarce, with all UK markets surveyed reporting a shortage of these skills.

As a result, Turner & Townsend is forecasting the end of a downward curve in construction cost inflation. Cost escalation in the capital, for example, is set to grow from 2% in 2024 to 3% through 2025 and 3.5% in 2026.

Regions outside of London are also expected to see heightened construction cost inflation in response to shifting, and ultimately growing, demand.

While some traditionally strong UK sectors such as automotive are experiencing a softening of investment, the government’s recent Spending Review and Industrial Strategy have cemented the significance of defence and energy sectors – and the manufacturing capabilities to support these. This is setting in motion a surge in demand in the UK’s wider regions.

In Bristol, increased demand is contributing to growing construction cost escalation – from 3% in 2024 to 5% through this year – as the market navigates resource constraints.

Construction is also facing rising demand for the expansion, maintenance and renewal of public estates through schemes such as the New Hospitals Programme and Schools Rebuilding Programme.

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.”

The top 10 most expensive place to build globally are: