UK construction is bracing for increased cost pressures over the next 12 months as geopolitical tensions in the Middle East begin to affect the sector.

A recent survey of more than 350 construction professionals, conducted during the Construction Outlook webinar, revealed that over half of cost consultants and surveyors (51%) are already noticing an impact on construction costs or project activity. Of these, 37% reported seeing “early signs,” while 14% have observed a “clear impact.”

When asked about tender prices specifically in the UK, nearly all respondents said they have either already seen an effect (28%) or expect to do so soon: 50% anticipate changes within three months, and 21% within three to six months. Only 1% expect a delay of more than six months, and 1% do not foresee any impact.

Dr David Crosthwaite, chief economist at BCIS, said: “According to almost one-third of the professionals we polled, geopolitical risk is already feeding into construction pricing. Given the lag in official data, these early signals from industry are helpful for understanding how cost pressures are evolving in real time.

“What we heard from the respondents aligns with our expectations, with suggestions that contractors are more cautious about committing to fixed prices. In some cases, they are reportedly shortening the period they are prepared to hold quotes for and looking to reintroduce fluctuation mechanisms to manage uncertainty.”

Input Costs Expected to Rise

Looking ahead, 95% of professionals expect materials costs to increase over the next year, with just 2% predicting stable costs. Labour cost expectations are slightly lower, with 62% anticipating a rise, 26% expecting no change, and 3% predicting a fall.

Dr Crosthwaite added: “We came into 2026 with fairly benign movement in input costs. After a period of falling materials costs between 3Q2023 and 2Q2024, annual growth in the BCIS Materials Cost Index was 2.8% in 4Q2025.

“Labour costs have been the more significant cost driver in recent years, with the BCIS Labour Cost Index showing 6.8% growth in the year to 4Q2025. This largely reflects wage increases catching up with the higher levels of general inflation seen in previous years.

“The sudden disruption to the energy market caused by conflict in the Middle East is expected to place additional pressure on the sector, particularly where projects rely on energy-intensive products such as steel, cement and bricks. The big unknown, which will determine the extent to which input costs are affected, is how long the conflict lasts. A month on from the initial US and Israel air strikes on Iran, there’s no clear indication of when it will end.”

Labour Availability and Workload Outlook

Labour pressures remain a concern, with 43% of professionals expecting availability to remain the same over the next year. One-quarter predict a decline, 20% anticipate an increase, and 12% were unsure.

Construction activity continues to be uneven, with private residential work recovering slower than anticipated. Overall construction output rose by 1.8% in 2025 compared with 2024, according to ONS data. Workload expectations among professionals reflect this mixed picture: 43% expect their workload to remain unchanged, 24% predict a fall, 17% expect an increase, and 16% are unsure.

Dr Crosthwaite said: “While workload expectations remain mixed, the outlook for costs is more consistent. We would expect these pressures to begin feeding through into official data in the coming weeks. However, increased competition for work may limit the extent to which rising costs are reflected in tender prices.”