Surging rents, inflationary pressures and the cost-of-living crisis has seen London move up the rankings as one of the most expensive cities to live and work, new research shows.

London is now ranked eighth in the Mercer’s 2024 cost-of-living ranking, up from ninth a year earlier, and just one spot behind New York.

Hong Kong remains the most expensive city in the world to live for expats and workers for global businesses, followed by Singapore in second spot.

Switzerland occupies the next three slots with Zurich, Geneva and Basle, all in the top five with the three Swiss cities once again staying unchanged,

The Mercer ranking is used to calculate living costs for workers who primarily work overseas for businesses and multinationals.

The only other European city in the top 20 ranking was Copenhagen, followed by Paris at 29th and Berlin at 31st.

UK cities outside of the capital fare much better with Edinburgh at 53rd, down from last year’s 33rd position, while Glasgow was at 68th and Birmingham at 78th and Aberdeen at 82nd, down from 37th.

Yvonne Traber, global mobility leader at Mercer, said: ‘The cost-of-living crisis has already had a significant impact on the mobile talent employed by multinational organisations. High living costs have required some assignees to adjust their lifestyles and cut back on discretionary spending. Some employees have even struggled to meet their basic needs.”

The cost of housing was a major factor in the cost of living city ranking. Between 2023 and 2024, there was a lot of volatility in this cost around the world, with housing rental prices varying significantly between cities.

A contributing factor to the cost of housing is the supply-demand imbalance, which is placing upward presure on rental values.

The index showed that London rents went up 4% on average, 7% in New York and 21% in Dubai.

“When housing costs are high, employees may need to spend a significant portion of their income on rent or mortgage payments, leaving them with less disposable income for other expenses. This can lead to financial stress and a reduced standard of living, which can have a negative impact on employee morale and well-being,” Mercer stated.

It added: “Rising housing costs in many cities around the world have made it increasingly challenging for organisations to attract and retain top talent for international assignments.

“As housing costs rise, organisations may need to allocate a larger portion of their budgets to provide competitive compensation packages that include housing allowances or subsidies. This, in turn, may put a strain on the financial resources of these organisations, especially if they have a large number of employees in high-cost areas.”