Insulation specialists and solar and heat pump installers in London now typically earn £70 (US$88) per hour and wages have soared by 22% in the last 12 months.

These trades, which are on the front line of the energy transition, are now paid two and a half times more than general construction labourers who typically earn £28 (US$35) per hour in the capital.

According to a new report by Turner & Townsend, the global professional services company, all UK regions are suffering from an acute shortage of skilled construction workers as competition for labour has pushed costs to record levels in the UK.

The company’s International Construction Market Survey (ICMS) 2024 report indicates that rising costs for specialist green contractors are particularly high. Even outside of London, the average UK wage for these specialists is still £47 (US$59) per hour, around twice the cost of general labourers.

The shortage of skilled construction workers and high wage inflation threatens the UK’s delivery of its binding net-zero target. All nine UK regions surveyed reported skills shortages, and 78% of UK markets reported this shortage is already having a ‘major’ or ‘large’ impact on programmes.

Labour cost inflation and the impact of skills shortages is not limited to low carbon development. Overall, average construction wages in the UK have increased by 13% since 2023 – rising from £36 (US$44) per hour to £42 (US$50) in 2024.

London ranks as the 10th most expensive construction market globally, rising from 14th in 2023. Average construction costs in the capital have risen to £3,503 (US$4,473) per m2 compared to 2023 when costs were £3,024 (US$3,862) per m2.

Despite the high labour costs and wage inflation for some trades, overall UK construction inflation is coming down year-on-year, and the report forecasts average inflation in 2024 will be 3.0% for the UK, falling from 4.2% in 2023.

This forecast will be welcomed by the sector, which has been knocked in recent years following the Covid-19 pandemic and impact of the energy price shocks.

Chris Sargent, managing director of UK real estate, at Turner & Townsend, said: “We’re seeing the rise of the green specialist across the UK. As a nation we have a relatively old and inefficient building stock, and construction is absolutely central to meeting our net-zero goals and making our homes, offices and public buildings fit for the future. Fundamentally, this can’t be done without the workforce. Hundreds of thousands of new trained specialists are required to give the sector the capacity it needs for the green transition.

“High wages may make the role more appealing to many, and attract these much needed skills. But green construction cannot afford to be in a separate tier of costs from traditional work. We need to help make net zero achievable and affordable by investing now in building and training the pipeline of skilled workers we need, and by adopting innovative digital tools to improve productivity and outcomes.”

91 global markets were surveyed in the ICMS, including nine key UK regions – London, Manchester, Bristol, Leeds, Edinburgh, Birmingham, Glasgow, Newcastle and Belfast.

Globally, the report shows the US continuing to dominate the rankings of the most expensive places to build, with six US cities in the top ten. New York has retained its position as the most expensive market to build in for the second year running at an average cost of £4,536 (US$5,723) per m2.

The report sees the impact nearshoring prompted by supply chain disruption and geopolitical tensions. This is resulting in growth and investment in manufacturing, especially in emerging international markets such as Malaysia, Indonesia, Nigeria, Brazil and Mexico. Labour constraints remain a significant inflationary factor globally, and all but three of the 91 markets surveyed reported an impact from such skills shortage.