Construction clients, developers and project teams must prepare for renewed volatility but avoid making premature decisions in response to conflict in the Middle East, urges Turner & Townsend, the global professional services company.
In its Spring 2026 UK Market Intelligence report (UKMI), the company has held its forecast for tender price inflation (TPI) at 3.5 percent for real estate and 5.0 percent for infrastructure. These projections factor in a range of complex market pressures, including labour and materials price inflation to the changing taxation through the Carbon Border Adjustments Mechanism (CBAM).
The report highlights the conflict and its wider repercussions on economies, trade and logistics as a source of understandable concern for construction costs, timescales and overall viability.
However, it is warning against reacting too quickly, calling instead for measured, evidence-led decisions based on live pricing data, intelligence around market capacity, and robust scenario planning.
The report says that while the start of 2026 brought a more stable economic outlook, economists are now anticipating higher CPI inflation, and a reversal of interest rate cuts that had previously been confidently priced in by borrowers. It highlights energy pricing as a significant risk, in line with the International Monetary Fund’s (IMF) decision to lower its 2026 UK growth forecast to 0.8 percent, due to the country’s status as a net importer of energy.
Stephanie Marshall, managing director, UK real estate cost management, explains: “While we started 2026 with steadier sentiment in the market, confidence is being disrupted again. Projects are operating in an increasingly complex landscape and reacting too quickly to uncertainty brings its own risks. The impacts of the Middle East conflict on construction will depend heavily on how the situation unfolds in the coming weeks and months.”
Turner & Townsend is underscoring the need for clients and project teams to balance disciplined risk assessment with flexibility – keeping a close watch on the changing situation and potential disruption to make calculated and informed adjustments to projects and maintain progress through the volatility.
Stephanie Marshall adds: “Our advice to clients is not to speculate or rely on assumptions, but to base decisions on the facts of what we’re seeing in the market. That means having a clear view of live benchmarking data and tendering trends. It’s also means working more closely with supply chains – understanding suppliers’ positions and building a realistic view on costs and how risk can be allocated most effectively.
“All of this becomes even more important when we consider the ongoing capacity constraints across construction. Although the latest S&P Global UK Construction PMI figures may show new projects continuing to fall, there are significant existing programmes coming down the track – from the New Hospitals Programme to NISTA’s £718bn infrastructure pipeline – and contractors’ increasing risk aversion will keep capacity concerns front of mind.
“There are headwinds, new and persisting, which are impacting construction’s ability to invest and deliver. For project teams, the priority must be to focus on what’s within their control or influence – making informed, confident decisions, not rushed ones.”