UK construction perspective 2026 – Mid year update

• Increases in energy costs, commodity prices and supply chain disruption have had direct and indirect effects on construction, coupled with ongoing labour cost pressures, have contributed to a revised JLL house view range of 2.8% to 4.5% across regions and sectors for 2026.
  
  
• Energy prices and supply chain disruption resulting from the ongoing conflict in Iran are now impacting energy intensive materials and some construction product supplies. Steel, glass and cement prices have increased by 5-7% between January and May 2026, following two years of relative price stabilisation.
  
  
• UK construction pipelines remained subdued through H1 2026, with renovation, repair and maintenance work supporting output while new-build activity struggled across all regions.
   

JLL's UK Construction Perspective 2026 mid-year update examines how the geopolitical events, conflict in the Middle East and the closure of the Strait of Hormuz, and ongoing economic pressures are reshaping UK construction costs and pipelines through the second half of 2026. Published in July by JLL Research, the report revisits the JLL 2026 Construction Perspective, published in January this year, and reviews what has changed since.

The 2026 JLL UK Construction Perspective report, published in January, set out a cautiously optimistic but pragmatic view: improving market confidence and anticipated interest rate cuts, tempered by continued construction cost inflation. Construction cost forecasts in early 2026 anticipated continued increases from 2025, as energy and material prices remained elevated and labour costs continued to rise. JLL's 2025 forecast of 2.5% closely matched the reported 2.52% outturn, strengthening the JLL TPI model and H1 forecast.

The JLL January house view reported that UK Tender Price Index would rise across 2026 to an average of 3.5%, however, this early 2026 view did not account for the recent economic and geo-political events, with the scale and speed of these impacting construction costs.

Accounting for both increased cost pressures and greater uncertainty, the previous assumptions on the direction of price increases holds, but the possible range and upper limit assumptions have widened reflecting the challenges of the industry. The subsequent impact of the Strait of Hormuz closure and ongoing uncertainty the JLL house views has been revised to the range of 2.8% to 4.5% for the UK, driven by direct material and product costs, likely wage inflation, the impact of uncertainty in tender pricing, and regional variations in pricing.

Following two years of relative stabilisation, construction material prices are rising again as a result of the conflict in the Middle East. The effects are showing up in three ways: global supply chain disruption has raised availability and shipping costs for materials, equipment and services sourced internationally; direct exposure to Middle East production is affecting specific commodities, including aluminium, copper and petrochemical-based products; and energy price increases are impacting production costs, site operations and logistics.

Energy costs rose following the closure of the Strait of Hormuz, with increased prices across Europe peaking in March-April at 60%-70% above January rates, and now 30%-60% above January rates, while in the UK, commercial energy process rose by approximately 20% during the conflict. This has fed through into pricing for energy-intensive materials such as steel, glass and cement, particularly where these are imported. UK Producer Price Indices (PPI) for steel, cement and glass have risen since March 2026, reversing two years of relative stabilisation.

While the January report tempered the market optimism with practical construction cost considerations, improved pipeline and activity was expected throughout 2026, which has since been impacted by the economic implications of local and global events. Construction pipelines have remained subdued as the combined effects of global geopolitical event, UK political changes, and a stalling of anticipated interest rate cuts impacting market confidence. A contributing factor to this is how the financing backdrop has diverged more clearly from the January view, which anticipated that recent and expected interest rate cuts would support construction financing through 2026. Instead, the Bank of England's Monetary Policy Committee has held Bank Rate at 3.75% as the conflict in the Middle East pushed CPI inflation back up and introduced a live risk of a rate increase later in the year rather than a further cut. That shift removes one of the tailwinds the H1 outlook's more positive financing narrative was built on.

• Cost pressures will persist into 2027 as the ongoing conflict in the Middle East remains volatile, effecting energy, commodity and shipping costs.
• Pipeline recovery pushed later than expected, as activity was subdued through H1 2026. Investment trends signal a stronger recovery in 2027, reflecting 2026 as a stabilisation phase rather than a rebound.
• Potential implications of UK political leadership on construction sector are yet to be seen, with potential changes to regional investment being considered at policy level. As the clear favourite, Andrew Burnham’s position championing devolving spending power to local councils and mayors, could shift patterns of construction activity across the UK, but the reality of translating policy to delivery is unknown.
   

The full UK Construction Perspective 2026 mid-year report sets out JLL's detailed analysis of these cost and pipeline trends, including regional breakdowns, sector-level implications, and practical recommendations for stress-testing capital plans against a wider cost and financing range. Download the full report to see what these shifts mean for your projects and portfolio.