Construction activity weakens as credit and cost pressures intensify in wake of Middle East conflct

RICS UK Construction Monitor Q1 2026

According to the Royal Institution of Chartered Surveyors (RICS) UK Construction Monitor report for Q1 2026, the UK construction sector experienced a soft start with workloads declining across most major sectors and forward-looking sentiment weakening.

The headline workloads indicator fell to a net balance of -12%, down from -6% in the previous quarter, signalling a further loss of momentum across the sector. Private housing weakened to -19%, while private commercial and private industrial workloads both moved to -15%.

Infrastructure remained the only sector recording positive activity, although momentum eased significantly, with its net balance falling to +4% from +12% in Q4 2025. Energy continued to lead infrastructure activity at +24%, followed by water and sewage at +20%.

Credit conditions emerged as a pressure point. The net balance for credit conditions over the past three months softened to -29%, whilst expectations for the next three months were reduced to a -51%. Financial constraints were cited by 66% of respondents as a factor limiting activity, making it the most reported obstacle, ahead of planning and regulation at 63%.

Cost expectations also increased notably. Respondents expect construction costs to rise by 6.6% over the next 12 months, with materials costs projected to rise by 7.5%. Tender prices are expected to increase by 5.6%, adding pressure to project viability and profit margins.

Twelve-month workload expectations also softened, with the headline outlook falling to +2%, compared with +17% in the previous quarter. Profit margin expectations deteriorated sharply to -27%, reflecting concerns about inflation, financing conditions, and uncertainty linked to geopolitical tensions, particularly in the Middle East.

The survey also found that repair and maintenance activity was broadly flat, with a net balance of +2%, while new work remained weaker at -11%. Employment expectations stayed positive but eased to +8%, down from +14% in Q4.

RICS Chief Economist, Simon Rubinsohn, said: “The impact of the war in the Middle East is clearly visible in the Q1 RICS Construction Monitor. Rising material costs, a tougher credit environment and increased pressure on margins are already leading some developers to slow construction activity. More significantly, plans for the next twelve months are being scaled back most notably in the private sector. Expectations around housebuilding are now flat which aligns with the comments from leading housebuilders in their recent trading updates and results statements.

“Alongside the tougher financial environment, concerns continue to be raised around the challenges thrown up in the planning process and the ongoing impact of the Building Safety Regulator (BSR). Even with the passage of the Planning and Infrastructure Act and the improved performance of the BSR, it is evident that both these factors remain significant impediments for developers.”

-ENDS-

Editor’s notes

The full report may be found at this link.

The RICS UK Construction Monitor is a quarterly survey of chartered surveyors across the UK.

About RICS

We are RICS. Everything we do is designed to effect positive change in the built and natural environments. Through our respected global standards, leading professional progression and our trusted data and insight, we promote and enforce the highest professional standards in the development and management of land, real estate, construction and infrastructure.

Our work with others provides a foundation for confident markets, pioneers better places to live and work and is a force for positive social impact.

For more information

khicks@rics.org
Kris Hicks
Global Media Officer @ RICS

press@rics.org