Business momentum since last year ‘wiped out’ by Middle East war as material prices rocket, bellwether index says

Construction output fell again last month as the Middle East conflict caused the sharpest month-on-month increase in material prices in nearly three decades, according to the latest S&P Global UK Construction Purchasing Managers’ Index.

New orders decreased by one of the sharpest rates in six years, with overall cost inflation increasing to the highest rate since November 2022 at the height of the Ukraine War, the data says.

Companies responding to the monthly survey reported a sustained drop in business activity over the last few weeks as Iran’s closure of the strait of Hormuz following attacks by the US and Israel launched on 28 February sent global energy prices soaring.

While improved weather conditions in March, following heavy rain in February which sent output down to an index of 44.5, led to a marginal easing of output decline, the figure was still well below the 50.0 no-change value at 45.6.

The downturn was led by a sharp fall in housebuilding activity, which fell to an index figure of 38.2 while total new business across all sector fell at the fastest pace for four months as clients held fire on investment decisions in response to heightened global uncertainty.

S&P Global Market Intelligence economics director Tim Moore said the loss in confidence during March had “wiped out” the steady improvements in business optimism reported since last year’s Autumn Budget.

“March data suggested a challenging near-term outlook for construction activity as total new orders decreased at one of the sharpest rates seen over the past six years. Survey respondents commented on fragile consumer confidence and delayed investment decisions in response to the outbreak of war in the Middle East,” Moore said.

Survey respondents also reported sharp cutbacks in the usage of subcontractors in response to lower workloads, while average lead times for materials lengthened for the first time since July 2025 and to the greatest extent for 14 months.

The survey findings, published this morning, come as the US agrees a two-week ceasefire with Iran dependent on the latter agreeing to reopen the strait of Hormuz, a shipping chokepoint through which around a fifth of the world’s oil supplies travel.

Global stock markets rose this morning in response to the conditional agreement and oil prices fell below USD $100 per barrel after hitting nearly USD $120 at the end of March, although Israel carried out fresh airstrikes on Lebanon this morning.