Middle East conflict fuelling construction volatility, says Gleeds

A market report from consultancy Gleeds suggests growing concern among the construction sector as it grapples with the effect of the war in Iran.

Global conflicts overtook interest rates and inflation as the primary challenge this quarter, according to the survey, with almost two-thirds citing concerns about the Iran war’s impact on commodity shortages and price increases.

Nearly half of those surveyed said they had turned down a tender opportunity in Q1 in light of the increasingly uncertain environment. And 57% reported that contractors were also becoming more risk-averse, concerned about volatile input costs.

Generally, respondents warned of tightening supply chains, cost spikes and a deteriorating economic outlook, highlighting the damaging knock-on effects of rising oil prices, particularly for those engaged in plant and energy-heavy trades.

Commenting on the report, Andy Ellis, UK managing director at Gleeds, said: “The conflict in Iran is already affecting construction costs and confidence, with the sector particularly vulnerable if prices continue to rise and we experience a slump in demand.

“Contractors are stepping back from risk, clients are seeing reduced appetite to tender, and the market is becoming more cautious. We expect to see greater use of fluctuation clauses and more defensive commercial strategies as volatility persists.”