The Iran conflict is fuelling soaring supply chain and energy costs for UK housebuilders, with industry warnings mounting that the knock-on effects are beginning to bite across the sector. MJ Gleeson, the Sheffield-based housebuilder specialising in lower-end homes, has become the latest firm to raise concerns over building cost inflation, triggering what it called “higher than usual caution” in how it manages its financial position.
The company said it had seen “some softening in footfall and reservations, and limited increases in the cost of some materials.” Chief Executive Graham Prothero added that this, combined with ongoing planning and site viability challenges, meant the business would adopt extra caution in land investment decisions and other operational management heading into the next financial year. Despite the warning, MJ Gleeson reported robust trading at the start of 2026, with net reservation rates rising to 0.88 from 0.86 in the same period last year. Its share price climbed more than 2 per cent on Friday’s opening to 234p, though the stock remains down over 44 per cent year-to-date.
How the Iran conflict drives up construction costs
The effective blockade of the Strait of Hormuz — through which approximately 20 per cent of the world’s oil passes — has sent energy and supply chain costs soaring. The disruption has triggered a sharp rise in global oil and natural gas prices, hitting energy-intensive UK manufacturers hard. Brick kilns, cement plants and glass factories are among the operations most exposed to these price rises, with the cost of materials such as bricks, concrete, cement and aluminium climbing as a result. Aluminium has hit a four-year high following Iranian strikes on smelters in Qatar and Bahrain, while steel, copper and PVC have also seen rapid inflation.
Beyond direct material costs, the conflict is extending lead times for critical construction components. Although the UK does not import large volumes directly through the Strait of Hormuz, indirect consequences — such as China’s reliance on the waterway — are feeding through to British imports. Transportation costs are rising as cargo ships are rerouted, and the reduced availability of oil is pushing up the price of energy-intensive products across the board. The wider economic picture is deteriorating: UK CPI inflation rose to 3.3 per cent in March 2026, the IMF has cut its UK GDP growth forecast for the year to 0.8 per cent, and the Bank of England is now expected to consider interest rate hikes rather than cuts because of renewed inflationary pressure.
Housebuilders have indicated that inflation fears are already damping demand for new homes. MJ Gleeson noted that buyer appetite had begun to decline.
Broader industry impact and other firms’ struggles
The warning from MJ Gleeson follows similar cautionary signals from other construction firms. FTSE 100 housebuilder Persimmon said on Thursday that it was starting to see early signs of increased inflation in its supply chain, driven by higher energy costs, which it expected to affect the second half of 2026 and into 2027. “We are looking to mitigate these where possible through our strong relationships with our suppliers and subcontractors,” the company said. Persimmon, which makes some key materials itself — including bricks, tiles and timber frames — said its first-quarter performance was in line with expectations, with private sales rates ticking up and forward orders strengthening. It is holding its 2026 home-completions target of between 12,000 and 12,500 steady.
Proservice Building Services Marketplace, the AIM-listed digital marketplace for building tools and supplies formerly known as HSS Hire, also issued a warning on Friday. The company cited “broader macroeconomic pressures – particularly within the UK construction sector, which has weighed on demand across parts of the Group’s end markets.” Proservice reported revenue of £248 million for the year ending March, below analyst expectations of £260 million, and said pre-tax earnings were expected to be at breakeven. The firm is facing obstacles in its attempts to refinance £41 million in bank debt, with existing facilities due to expire in September. “Wider macroeconomic and geopolitical issues have resulted in discussions taking longer than previously guided,” the company said. Its share price plunged 18 per cent on Friday’s opening to 3.15p, taking its year-to-date decline to 56 per cent.
Industry data paint a grim backdrop. Construction output has been in decline for over a year, with February 2026 marking the 14th consecutive month of contraction according to the Purchasing Managers’ Index. Output fell 2 per cent in the three months to February. Insolvency levels remain elevated, labour shortages persist — around two-thirds of construction firms report recruitment difficulties — and margins are being eroded by rising costs for labour, materials, insurance and compliance. JLL estimates an average BCIS Tender Price Index increase of 3.5 per cent in 2026. The value of projects starting on site dropped 10 per cent in early 2026, with residential activity hit particularly hard by weakening demand, higher borrowing costs and planning delays.
Mounting pressure on government housing targets
The government is relying on housebuilders to deliver its target of 1.5 million new homes in England during this parliamentary term. Reforms to planning rules have been introduced to accelerate development, but delivery has fallen well short of the required pace. In 2024/25, only around 200,000 net additional homes were delivered in England — far below the roughly 370,000 needed annually. Between July 2024 and January 2026, just 309,600 homes were added, representing about 20.6 per cent of the target.
Rising construction cost inflation, now exacerbated by the Iran conflict, is compounding existing concerns over whether this ambition can be realised. Major housebuilders such as Barratt Redrow are already scaling back land purchases because of the uncertain backdrop created by the war. MJ Gleeson itself is undergoing restructuring, integrating its Yorkshire East region into Yorkshire South and West from 1 July, aiming for annualised overhead savings, and expects to book restructuring costs and legacy site provisions totalling between £5.2 million and £7.1 million. The company anticipates adjusted group profit before tax for the year ending 30 June 2026 to be in line with market consensus of £18.2 million. Proservice has forecast underlying EBITDA for FY27 of between £9 million and £12 million, well below the market consensus of £19.6 million.
