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London construction inflation continues to rise

The cost of construction in London is now rising at a faster rate than at any point over the last five years, and the inflation rate will continue to rise according to a report published today.
Cost consultant EC Harris' 2007 Economic Survey predicts that construction tender prices in the capital will rise by 6.3% over the next year and 6.5% the following year.This is roughly 2% higher than the national average rate of tender price inflation and three times the rate of the consumer price index, the Government's preferred measure of UK inflation.London construction inflation has remained steady at an average of 6% for the past five years, but a rush of projects, including the London 2012 Olympics, and a shortage of skilled labour are combining to make London an even more expensive place to build.EC Harris head of cost research Paul Moore said: 'The pressure being faced in the market today, in terms of workload, supply chain capacity and the impact of major schemes like the London Olympics means that it is inevitable that tender prices will continue to rise faster than retail price inflation.''On smaller schemes there still remains some leeway for negotiation. On larger schemes, however what we are finding is that there is a limited number of contractors who might appear on tender lists and as a result figures for overheads and profits are becoming ring fenced.'

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