The International Construction Market Survey 2017 from Turner & Townsend found that the North of England is expected to face cost price inflation of 3.6%, the UK’s highest outside of London (4.1%).

“This year’s survey indicates a slowly warming construction industry suffering from increasing labour shortages in an improving global economy,” said Steve McGuckin, global managing director for real estate at Turner & Townsend.

“London has long been the engine room of the UK construction industry, but the market in northern cities is starting to pick up steam.

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“The devaluation of sterling has woken foreign investment up to the opportunities in many other UK regions, and Manchester in particular has emerged as the most attractive alternative to the capital – as can be evidenced in the huge volume of high-rise schemes and residential activity.” 

The survey characterised construction markets whose prices are being driven up by a high number of projects and intense competition for physical resources and labour as warm, hot or overheating.

The North of England is one of only 14 markets out of 43 worldwide expected to grow warmer this year.

While London was classified as a hot market, the figures showed signs that the UK’s traditional north-south divide in build costs is starting to close.

Southern and central England are expected to see construction price inflation fall from 3.5% to 2% and 3.8% to 3.5% per cent respectively.

Despite this improvement, some 60% of cities assessed by the study were identified as warm, hot or overheating.

“As more markets report skills shortages than ever before in the history of this study, it is clear that construction is not doing nearly enough to tackle this issue, which if not addressed has the potential to become a crisis,” added Steve.

“Against this backdrop, the UK construction industry needs to boost productivity levels.

“There is an urgent need for contractors and clients to embrace innovative technologies and new methods of construction, as well as using data analytics and better programme management to increase output.”