The UK construction sector is entering a more cautious phase in 2026, according to the latest Construction Management Intelligence report from Rider Levett Bucknall (RLB UK), with geopolitical developments now influencing market conditions alongside economic factors.

While recent data from the Office for National Statistics (ONS) shows construction new orders increased by 12.6% year on year, uncertainty linked to the conflict in the Middle East has introduced new risks to project pipelines, procurement, and construction costs.

Infrastructure and public housing drive construction orders

The increase in construction activity has been supported by strong demand in infrastructure and public housing projects.

According to the report, infrastructure orders rose by more than 46%, while new orders for public housing increased by nearly 41%, contributing significantly to overall sector growth.

Despite this positive demand outlook, contractors and developers are now assessing the potential impact of global instability on supply chains, fuel prices and material costs.

Geopolitics influencing tender prices

Prior to the recent geopolitical developments, inflation appeared to be stabilising and interest rates were expected to fall. However, the current situation has created uncertainty around energy prices and international trade routes, which could affect construction supply chains.

RLB’s weighted average Tender Price Index (TPI) forecast for 2026 has been revised slightly upward to 3.45%, compared with a forecast of 3.27% in the previous quarter.

The report suggests contractors may increasingly price projects selectively, with risk allowances differing across sectors depending on supply chain exposure and project complexity.

Paul Beeston, Head of Industry and Service Insight at RLB, said: “Once again, the industry is navigating the impact of international events. We are increasingly seeing tender prices influenced more by geopolitical factors than by traditional economic cycles. Much will depend on how quickly the current situation is resolved, but it is important to recognise that many underlying conditions are more positive today than during previous shocks. While risks have risen, it is important not to allow rhetoric to overtake reality.

If disruption is short-lived, any inflationary pressure from higher input costs is likely to be moderated by slowing pipelines. However, a more prolonged period of disruption would shift the balance of risk between concurrent input cost pressures and pipeline concerns which will pull tender prices in different directions in different sectors. In that environment, informed decision making, rather than over reaction, will be critical.”

The report highlights that while construction demand remains strong in several sectors, market sentiment is shifting from earlier optimism toward greater caution as the industry monitors geopolitical developments and their potential impact on project delivery.