Barratt cautions over rising build costs as Iran war sends energy prices soaring

Barratt Redrow has warned over rising build costs and the potential for interest rates to stay higher for longer due to the Iran war as soaring energy costs send material prices higher.

The UK’s biggest housebuilder said while build costs are set to remain in line with guidance at around 3% in its second half to the end of June, it expects price rises to pick up in its new financial year.

Soaring oil prices since the start of the war at the end of February have sent fuel and energy costs surging around the world, which is impacting the cost of raw goods and materials.

Barratt cautioned that “higher energy costs are likely to be reflected in increased building material costs in 2026-27”.

It confirmed its overall financial performance remained on track for the current year, with any direct impact from the Middle East conflict so far “limited”, but added that the outlook for 2026-27 was more uncertain.

It said: “The ongoing conflict in the Middle East is contributing to increased economic uncertainty, including the potential for a more prolonged higher interest rate environment and renewed cost pressures.

“While we currently expect any direct impact on 2025-26 to be limited, visibility beyond the current financial year remains more uncertain.

“In this context, we are closely monitoring developments while maintaining a disciplined approach to capital allocation, land investment and cost control, ensuring we retain the flexibility to adapt to changing market conditions.”

It is set to give more details on expected build cost inflation and market conditions at its end-of-year trading update in mid-July.

The group – which became the biggest player in the sector after Barratt’s £2.5 billion deal to buy Redrow in 2024 – said it hopes to offset rising build inflation through cost cutting and its “excellent” supply chain relationships.

Barratt is trimming costs by £100 million over three years, with £50 million in savings this year and the final £30 million in 2026-27.

It added it can switch to cheaper timber frame construction methods to help keep costs down.