Skyscrapers face huge cost rise after Bloody Tuesday

Doubts about the viability of skyscraper developments grew this week as analysts began considering the implications of the destruction of the World Trade Centre.

Two immediate concerns are a rise in construction costs of up to 300% caused by more stringent fire regulations and a 50% hike in terrorism insurance for landmark buildings.

Fire experts say the deaths at the World Trade Centre have focused concern on ensuring a building's structure is robust enough to allow evacuation. David Glover, a structural engineer with Arup, said the industry would respond by tightening building codes.

One possibility is that steel would be required to withstand high temperature fires for longer periods. David Sugden, chief executive of the Association of Specialist Fire Protection, said this could increase build cost by between 10% and 300%, depending on the method used.

A new standard, BS 9999 Fire Safety Engineering in Building, is currently being written. Peter Bressington, director of Arup's fire division, said it was inevitable that the organisations formulating the standard would take the World Trade Centre collapse into account.

The impact on insurance costs is likely to be felt sooner than fire regulations. Roger Hill, an insurance analyst with investment bank UBS Warburg, said a 50% hike in premiums for target buildings such as Canary Wharf tower was possible. He said: "What terrorism attacks the UK's had in recent years have been limited. The threat's gone up."

Terrorism insurance in cities is typically £150 for every £1m of the building's value. Higher premiums would add thousands of pounds to the insurance costs of large towers.

Pool Re, a terrorism reinsurance specialist underwritten by the government, hinted that it might change its method of assessing terrorism insurance from location to design.

Steve Atkins, chief executive of Pool Re, said: "At the moment we don't distinguish between types of building. Terrorism insurance is driven by location, not by construction. We need to wait to be clearer about the implications of the events in New York."

Alastair Nevin, managing director of Wren Managers, which provides professional insurance to architects, warned that its clients may have to increase their cover, which would tend to drive up construction costs.