Protracted impact of Iran war threatens construction growth

The construction industry will continue to feel the shockwaves from the Iran war for some time, according to Pick Everard following new research.

The multi-disciplinary consultancy has warned that construction firms risk being stuck in a “watch and wait mentality”, which threatens growth.

Pick Everard said mitigating the impact of inflation and supply chain disruption requires active planning to overcome the threat of cracked construction pipelines and reduced demand.

The warning follows its recent survey, which found 70% of respondents working in construction fear prices and capacity will be severely affected as a result of oil restrictions within the next six months.

Inflation has now reached 3.3%, largely driven by an increase in fuel prices following the war in the Middle East.

Pick Everard noted that this has intensified pressure on an industry already grappling from fragile confidence and ongoing project delays.

Operations director Gavin Mason said: “It’s not a lack of intent that is the issue now but a ‘watch and wait’ mentality that is threatening growth.

“The problem is that the shockwaves from the Iran war are likely to be felt by construction for some time – regardless of how peace talks play out.

“In these volatile times we need to collaborate and foster agility through strategies like advanced procurement and data sharing.”

In the latest market intelligence from Pick Everard, 45% of respondents described the mood of the construction industry as concerned or very pessimistic.

Survey participants, comprising clients, contractors, developers and consultants, cited costs and viability as among the biggest challenges they face, while almost 70% of respondents fear that a further squeeze on prices and capacity is imminent.

The research also showed more than half of those surveyed believe the war in the Middle East had affected immediate delivery plans.

Only 17% thought inflation had minor or no impact on construction projects.

Gavin added: “The past six years have seen three consecutive periods of major supply chain disruption – the triple shock of Covid, the conflict in Ukraine and now the Gulf.

“This is starting to feel like the new normal, and the effects are felt throughout the economy long after the events have stopped.

“As advisers, we need to approach buildings in a way that helps clients de-risk construction programmes by prioritising locally sourced materials and specifying less energy-intensive products that are less vulnerable to major price fluctuation.

“This isn’t just about meeting a sustainability target now; it’s about project viability.

“Our clients are continuously seeking to make schemes solvent and are already struggling with the previous impacts on cost driven through crises, planning and statutory compliance.

“It will be more important than ever to tap into strategic design and project advice to make sure projects become deliverable.”