Quantity surveyor Franklin + Andrews' cost research unit has produced its annual study of whole-life costs. Here we hold up the results against last year's figures and pinpoint fluctuations in construction, ownership and labour costs for a notional manufacturing plant in 12 European countries
The whole-life cost of a building is a critical factor in deciding where in Europe to locate a manufacturing plant. The most cost-efficient location for construction may not be the most cost-effective once the cost of ownership over the plant's lifetime has been taken into account. By using whole-life costs, the evaluation of alternatives can be considered and the best-value strategy for building and operating a facility can be identified.

Construction costs
To enable a comparison to be made between different European countries, Franklin + Andrews looked at the costs of a generic 2250 m2 factory unit without considering the cost of compliance with local building regulations. A full cost study would also need to include land acquisition costs, capital allowances, finance costs and taxes, which have all been excluded for the purposes of this study.

Since the last study (5 April 2002), Ireland has headed the field in capital cost increases with a rise of 4.3%. This was closely followed by Greece, up 3.6%, and the Netherlands, up 3.5%. Finland is the only European country in the study where construction costs fell over the year – even if it was only 0.9%.

Ownership costs
Two of the key cost drivers in ownership costs are energy usage and maintenance. The study assumed a common maintenance application and normal energy usage. However, if a property is underused, with low staff numbers, energy costs may be lower than normal. Likewise, if poor administration results in maintenance being carried out on an infrequent basis, overall maintenance costs may increase over time.

Over the past year, Ireland had the biggest increase in occupancy costs with a 4.5% hike. Finland's 2.1% increase was attributable to an electricity cost rise of 4.4%, a communications cost increase of 3.9% and water costs up 2.5%.

In the UK, total occupancy costs of a manufacturing plant have decreased 1.4% over the last 12 months. This was due to falls in the cost of gas (down 21.3%), water (down 1.8%) and electricity (down 11.1%). Although there were increases in security, management and porterage costs, these did not serve to redress this drop. Portugal was the only other European country to see a decrease in occupancy costs, but only 0.5%.

Labour costs and productivity
The cost and performance of labour is a significant component of the occupancy figure. The impact of labour will depend on the type of activity: for example, cleaning, porterage and security costs will all reflect labour costs and productivity to a far greater extent than communication costs. The labour performance factor table (attached) illustrates productivity across Europe. The figures were complied from an analysis of three independent studies of labour-intensive activity across Europe, taking into account a broad spread of factors such as working environment, climate, skills, applied training and so on. The average figures from all three studies were applied here.

The figures give labour performance relative to the UK, which has a factor of 1.00. Just as last year, the table shows that only German labour is more productive than the UK – with a value of 0.94. But countries such as Spain and Austria are almost a third less productive with factors of 1.32 and 1.31 respectively.

The labour performance factor, when read in conjunction with the average salary, gives an indication of which countries are most economic for labour intensive activity.

Time and usage factors
The period of ownership will cause significant changes to a manufacturing plant's whole-life cost. For all countries, the cost of occupancy over the lifetime of a building is far greater than the initial cost of construction. Therefore, when deciding where to locate a facility, it is important to consider how long the facility will be required. For this study the whole-life costs of the building were considered over a 25-year occupancy period.

Whole-life cost comparisons
When compared with last year's Franklin + Andrews study, there have been some spectacular increases in the whole-life costs of the notional manufacturing plant. Ireland, for example, experienced a huge increase, in comparison with all the countries studied, with a massive 8.6% hike in whole-life costs – the result of the country having one of the highest inflation rates in the European Union. Greece suffered the second largest increase in whole-life costs at a rate of 4.7%, due in part to increases in waste costs (4.8%), a leap in water costs (up 10.2% on last year), and a 3.6% increase in capital costs. Meanwhile, stability rules in Finland with a 1.2% increase in whole-life cost compared with last year's figures – an increase of only 1.2% over the year.