Construction firms report record inflation jump as Iran war hits new orders

Construction firms reported a record surge in cost inflation as the conflict in the Middle East weighed on new orders and confidence in the sector.

It came as new figures showed the slump in the UK construction industry continued last month.

The latest S&P Global UK construction purchasing managers’ index (PMI) showed a reading of 45.6 in March, improving from 44.5 in February.

Any reading above the 50.0 threshold indicates that activity in the industry is increasing while anything below means it is contracting.

It means that the sector continued to decline in March but at a slightly slower pace than in February.

The latest figure marks the 15th month in a row that activity across the sector has fallen.

Tim Moore, economics director at S&P Global Market Intelligence, said: “UK construction companies indicated a sustained downturn in business activity during March, led by another steep reduction in residential work.

“March data suggested a challenging near-term outlook for construction activity as total new orders decreased at one of the sharpest rates seen over the past six years.

“Survey respondents commented on fragile consumer confidence and delayed investment decisions in response to the outbreak of war in the Middle East.”

The monthly figures showed that housebuilding activity declined particularly quickly, followed by civil engineering and commercial construction.

All sectors nevertheless saw slower contractions than in February, with civil engineering reporting the strongest data since May 2025.

The latest survey showed that international shipping delays amid the conflict in the Middle East led to deteriorating supply chain performance.

Firms highlighted that fuel surcharges and rising transport costs contributed to a surge in input cost inflation.

Joe Sullivan, construction and real estate partner at MHA, said: “The slight uptick in construction PMI suggests the sector is steadying but not bouncing back.

“Any small improvement is likely due to reduced weather disruption.

“Overall, demand still looks weak and many projects are being pushed back rather than kicked off.”