Middle East Conflict Biggest Risk to Construction Material Supply Chain

The main risk facing the UK construction industry is low demand and rising energy and fuel costs that are driving up prices, says the Material Supply Chain Group.

Total construction output decreased by 2.0% in the 3 months to January 2026, marking four consecutive months of decline. Infrastructure, energy-efficiency work, and some commercial and industrial projects saw slight growth, but not enough to offset continued weakness in new-build housing and residential repair, maintenance, and improvement.

Concrete plain roof tiles are currently the only sector of UK production expected to remain in short supply for the rest of the year, despite efforts by all three manufacturers to stabilise output by producing single colours for longer runs.

However, the biggest risk today stems from the impact of the Middle East conflict.

Most construction products used in the UK are produced either domestically or in Europe, and relatively few are at risk of availability issues directly linked to the conflict. Nevertheless, imports of wall and floor tiles, along with exterior porcelain and sandstone from India, have been disrupted by a halt in production caused by a gas shortage there. UK and European alternatives are available, but these are likely to be more expensive.

Shipping Costs

Shipping costs for goods imported from the Far East have risen significantly as containers are rerouted around the Cape.  Price volatility has seen costs increase by 20% to 100%, or even more in one case. Clearly, price is unpredictable, and the workarounds are resulting in longer delivery times.

Fuel Costs

The manufacturers, suppliers, and distributors of construction products and materials are by far the largest users of the road and rail networks, and there is clear evidence that they are feeling the impact at the pump.

The Middle East conflict has caused a surge in petrol and diesel prices – 10%-20% at the end of March. Fuel costs are yet to stabilise and increases will likely persist for some time, even if hostilities are quickly halted. With this in mind, some businesses and organisations are calling on the government to delay the removal of the fuel duty discount to avoid additional cost pressures on industry.

Energy Costs

The main challenge, however, is the rapid rise in energy prices and their immediate impact on material costs, particularly for products with energy-intensive manufacturing processes or derived from oil-based raw materials.

At the start of the supply chain, many of these manufacturers are facing significant cost increases, although some will be protected by energy price hedges in the medium term.

Many manufacturers recognise the industry’s challenges, adopting a measured approach, providing clear explanations and reasonable lead times when passing on additional costs. However, increased transport costs are proving to be less predictable.

Surcharges Concern

Merchants, housebuilders, and contractors all expressed concerns about any rapid imposition of surcharges with limited supporting evidence and insufficient notice of cost increases.

Commodity Prices

In the Mechanical Engineering sector, commodity prices such as copper were already increasing before the conflict, and steel is now the biggest concern: prices are changing so rapidly that some companies are struggling to obtain reliable quotes.

The government’s newly published steel strategy is also creating uncertainty. While there may be some benefits, there are worries about potential implications for imported goods. Cost volatility is closely monitored, with steel availability and pricing standing out as the most significant risks.

As costs are passed along the supply chain, profit margins will be squeezed at every level. Such pressure then increases the contracting tiers of the supply chain, with SMEs being particularly vulnerable. The stability of supply-chain finances is, therefore, fast becoming an urgent issue that the Construction Leadership Council’s (CLC) Material Supply Chain Group is monitoring.

In the face of such challenges and uncertainty, members of the Group strongly advocate that now more than ever, the industry should use this time to plan, work collaboratively, and share forecasts and requirements early with everyone involved.

Clear communication across the industry during these times is not only mutually beneficial but also vital for successful projects and a healthy, productive UK construction sector, the Group says.

The CLC’s Material Supply Chain Group statement is from co-chairs John Newcomb, CEO of the Builders Merchants Federation and Peter Caplehorn, CEO of the Construction Products Association.

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