- The Royal Institution of Chartered Surveyors said its net workloads balance for UK construction fell to -12% in the first quarter of 2026, the weakest since the pandemic‑induced downturn of 2020.
- Energy prices and supply chain disruption from the Middle East conflict have raised the cost of materials and delayed shipments, squeezing margins and deterring investment.
- The construction sector’s slump has dragged down broader economic sentiment, contributing to a fall in the all‑sector Purchasing Managers’ Index (PMI) to 48.7, below the 50‑point threshold separating expansion from contraction.
Britain’s construction industry is contracting at its fastest pace since the height of the Covid‑19 pandemic as soaring energy costs and geopolitical tensions choke demand and disrupt supply chains.
Surveys by the Royal Institution of Chartered Surveyors (RICS) and S&P Global show steep declines in workloads and new orders, with the construction PMI plunging to 38.2 in May – well below the 50‑point mark that indicates expansion.
Companies blame rising material costs, caused by the Middle East conflict and disruptions in the Strait of Hormuz, for delaying projects and eroding profitability.
Construction is highly sensitive to changes in input costs and economic confidence. The sector had been recovering from the pandemic slump, supported by government infrastructure programmes and strong demand for housing. However, the escalation of the Iran-US conflict has caused oil and gas prices to spike, increasing transport and manufacturing costs.
The resulting surge in material prices – particularly steel, concrete and asphalt – has led contractors to defer or cancel projects. In surveys, firms cite difficulties in sourcing basic materials due to shipping delays and war‑related insurance premiums. This has squeezed margins, making new projects unviable.
The downturn is widespread. Housing construction has slowed as higher mortgage rates and uncertainty deter buyers, while commercial projects face delays as investors await clarity on economic policy and energy costs.
Infrastructure initiatives, central to the government’s green‑growth agenda, are progressing more slowly than expected due to supply issues. The RICS survey shows employment in construction declining for the 17th consecutive month, raising concerns about skills erosion.
Energy costs are a key culprit. Diesel, used in construction equipment and transport, has seen prices double compared with pre‑war levels. The closure of the Strait of Hormuz has also reduced supplies of bitumen and asphalt.
These pressures have fed into inflation, prompting the Bank of England to keep interest rates elevated. Higher borrowing costs further discourage property investment and prolong the downturn. Policymakers face competing priorities: offering short‑term relief through energy subsidies or accelerating renewable energy and efficiency measures to reduce future price volatility.
