Iran conflict is a fresh construction challenge

While the international situation remains incredibly uncertain, the UK business and industry landscape, construction especially, is already starting to feel the pinch of the extreme volatility we’ve experienced over the past fortnight.

From housebuilding to major infrastructure, the shockwaves will be felt as the prospect of lower borrowing costs fade and operational costs spiral due to higher energy costs and reduced access to key structural materials via the Strait of Hormuz, at the centre of the conflict zone.

UK construction activity remains significantly depressed. Our index of projects under £100m starting on site shows a 15% year-on-year fall in aggregate value and a 24% drop against 2024 figures, while a limited pipeline of major projects over £100m has contributed to a 26% contraction in the market compared with last year.

This means that weak areas, especially private residential, will continue to slide, while growth will be put in jeopardy for other areas that have seen increases, such as offices. Existing pipelines are now extremely fragile and there is no guarantee that signed and sealed projects will be delivered to agreed dates.

The industry’s supply chain will be watching the situation nervously, with the best outcome being a swift resolution of the conflict and unblocking of trade routes.

Every day of logistical disruption is a body blow for construction and will set back recovery even further into the future.

In the meantime, contractors will need to review order books, assess the vulnerability of projects to delay and higher costs and try to secure new projects that can bridge potential gaps in their workload.

Allan Wilen, economics director, Glenigan