London more expensive than New York

London has overtaken New York to become the seventh most expensive city in the world, a study reveals today.

It is the dearest city in the European Union, and in the Western world as a whole, only Geneva, is more expensive. Rising housing and transport costs are the main cause, according to a survey of 144 cities by consultants Mercer

Duty on alcohol and tobacco was also particularly high in London compared with elsewhere in Europe.

Tokyo has replaced Hong Kong as the world's most expensive city, with Moscow second.

The survey measures the comparative cost of more than 200 items ranging from transport and entertainment to housing, food and clothing.

It found that a two-bedroom flat in a good area of London costs £1,900 a month compared with £1,200 in Zurich and £1,000 in Dublin.

The study was carried out in March when property prices in the capital had increased by 23 per cent over the past year. It did not take into account the effect of the congestion charge, which was introduced in April.

As well as increases in duty on alcohol and tobacco, the rise of the pound against the dollar also made London expensive compared with most major American cities.

Moscow's high position in the league - surprising considering its relatively low standard of living - is due to the enormous cost of providing high standards for foreign workers, according to Mr Murphy.

"The infrastructure there does not normally provide that standard," he said.

Osaka, Hong Kong and Beijing are in third, fourth and fifth place. Last year London was 10th, a position now occupied by New York.

Asuncion in Paraguay replaced Johannesburg as the least expensive city, the survey reported.

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