Construction costs on the Island 18% above UK average and comparable with Outer London

'Key problems' include reliance on imported materials, labour shortages and planning delays

Construction costs on the Isle of Man are 18 percent above the UK average and comparable with Outer London.

That's one of the findings of an interim report examining the impact of rising costs on major construction projects.

The review by AtkinsRealis was commissioned by Treasury, with the approval of the Brownfield Regeneration Steering Group, to consider the impact and scale of the challenge and what can be done to improve matters.

It also forecasts that tender prices will rise by a further 7.5 percent, in both 2026 and 2027, outpacing the UK.

Statistics from the Building Cost Information Service rank the Island as the joint 16th most expensive place to build.

We're in line with Hackney and Greenwich but not quite as expensive as Westminster, Kensington and Chelsea, or Jersey and Guernsey - the latter of which takes the top spot. 

The Island's reliance on imported materials, a shortage of skilled construction workers, and delays in the planning process have been identified as 'key problems'.

The review states how the labour market in the Isle of Man shares the same characteristic of the UK in that there is a lack of suitable skilled workers in both blue and white-collar workers.

On planning, it states: 'It appears that the Manx planning process is under resourced and straining to cope with development plans. 

'As a result many applications are stalled and this brings into the question of projects maintaining viability in a market facing upward pressure.'

Reliance on imported materials and concerns over the cost of fuel

When it comes to materials, the report states how the Island's is reliant on imported goods with the exception of a 'small quantity of aggregates and concrete blocks'.

This means, with no local competition for supplying materials and projects not offering sufficient size of order or regularity of pipeline, building merchants and contractors are unable to leverage price discounts. 

It adds: 'With materials being imported when pricing a tender annual transport increases need to be allowed for, therefore if a project is delayed this means that the cost of importing materials must be accounted for. 

'Another concern is that once the cost of fuel increases then transportation costs increase, this applies to both road and sea transport and the impact of fuel increases on logistic supply chain will be felt more acutely on the Island than other parts of the UK.'

Full report will examine future function and role of Manx Development Corporation

In light of the review the Brownfield Regeneration Steering Group has committed to continuing the development of policy options for consideration by the next administration.

A full report is expected later this year and Treasury says it will cover the future function and role of the Manx Development Corporation and its operating model, and the range of government interventions and support policies.

The Department for Enterprise will also bring forward proposals for a further round of the Island Infrastructure Scheme.

Treasury Minister Chris Thomas expects this full report to be published before the end of the calendar year.

Brownfield vs greenfield sites

AtkinsRealis says brownfield sites present 'additional complexity and uncertainty when compared to greenfield development opportunities' and are often more 'financially sensitive'.

The interim report states: 'Ground conditions, contamination, remediation requirements, infrastructure constraints, demolition costs, utilities diversion, flood mitigation, and other abnormal development costs can significantly impact viability before development has even commenced. 

'In many cases, the full extent of these risks is not understood until intrusive site investigations and technical assessments are undertaken, increasing both cost exposure and delivery uncertainty. As a result, brownfield regeneration schemes are often more financially sensitive to wider market fluctuations and cost inflation than conventional development projects.'

Treasury Minister Chris Thomas says: "This interim review provides an important evidence base for understanding the challenges facing regeneration and development on the Isle of Man.

"One such challenge for government is that it needs to specify and deliver a multi-year capital programme. 

"This is vital not only for delivering homes, public facilities and infrastructure, but also for supporting local economic activity, sustaining jobs and creating opportunities for people on-Island.

"If we are to retain and grow the capacity of the local construction sector, we need businesses to have the confidence to invest for the future.’"