UK builders battered by sharpest construction cost surge in nearly four years amid Iran war disruption

Britain’s construction sector faced its steepest jump in cost inflation in nearly four years in April, as escalating tensions linked to the Iran war disrupted global supply chains and intensified pressure on builders across the country.

According to the latest S&P Global UK Construction Purchasing Managers’ Index (PMI), input cost inflation surged to 81.4 in April from 70.5 in March, marking the second-biggest monthly increase since records began in 1997. The reading was the highest since June 2022, when post-pandemic inflation shocks rattled global markets.

The broader construction PMI, which tracks overall business activity, fell sharply to 39.7 from 45.6 in March, its weakest level since November and well below market expectations. A reading below 50 signals contraction.

Survey respondents pointed to rising raw material prices, shipping disruptions, and supply bottlenecks as key reasons behind the worsening business environment. Around 69 per cent of firms reported higher input costs in April, up sharply from 48 per cent in the previous month.

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S&P Global said delivery delays intensified as cargo vessels struggled to move through the Strait of Hormuz, a critical global trade route affected by the ongoing Middle East conflict. Builders also reported weaker client demand and falling new orders, which declined at the fastest pace since last November.

Tim Moore, Economics Director at S&P Global Market Intelligence, said the latest rise in purchasing costs was among the most severe seen in decades outside the post-pandemic inflation shock period.

The worsening outlook also hit employment across the sector. Construction firms accelerated job cuts in April, citing shrinking workloads and rising payroll expenses. Business optimism for the next 12 months weakened further as companies grappled with persistent geopolitical uncertainty and higher financing costs.

Civil engineering and residential house-building emerged as the weakest-performing segments, while commercial construction showed relatively smaller declines.

The data comes as the Bank of England closely monitors inflation pressures and supply chain disruptions to assess whether prolonged price increases could require tighter monetary policy.

Separately, the Royal Institution of Chartered Surveyors reported that construction activity in the three months to March was the weakest since the height of the COVID-19 pandemic in 2020.