Geopolitical Instability Trigger for Cost Inflation, Says Gleeds’ Q2 2026 Market Report

The latest Market Report from international property and construction consultancy Gleeds suggests that geopolitics remains the dominant near-term concern for construction, with 39% of respondents ranking global conflicts as the biggest threat, although this is down from 50% last quarter. Interest rates, inflation and investor confidence remain the next key risks, each cited by around one in five respondents.

This suggests caution is still high, but there is some optimism following the US-Iran peace agreement and resumed shipping through the Strait of Hormuz. The fall in crude oil prices since the 17 June memorandum of understanding is also encouraging, as geopolitical instability continues to be seen as a trigger for fuel, transport, and materials cost inflation.

The market is responding by increasing cost vigilance. Six in ten respondents are checking material or labour prices more regularly, mostly monthly, while 19% of organisations have contingency plans for import disruption. Common measures include pre-ordering and storing materials, using alternative products, and relying more on local suppliers.

Earlier procurement and faster technical sign-off in D&B contracts were highlighted as important ways to limit exposure to price volatility.

The Marketing to Contractors & Housebuilders feature (which is sponsored by South East Construction Expo) in the Sectors section of our Directory provides an overview of the sector, including
details of its various media channels and events, together with access to our downloadable database of those with responsibility for procurement at key firms.

The current political environment and government leadership change is negatively affecting investor confidence, according to 55% of our respondents. However, there is strong support for reforming approvals for critical energy and infrastructure projects, with 81% backing proposals to limit court challenges except on human rights grounds.

The public sector pipeline remains comparatively strong, while private sector viability is under pressure in many regions. Infrastructure is now among the strongest tender opportunity areas, supported by the government’s expanded 10-year infrastructure pipeline, now covering £718bn of projects and programmes. Data centres and education also remain attractive sectors.

Meanwhile, contractors are still selective. Once again, the majority of contractor respondents (89%) said they or their supply chain declined a tender in Q2. Pricing reflects risk awareness rather than optimism, though margins are gradually rebuilding, reaching 6.4% in Q2.

The overall picture, therefore, is one of cautious stabilisation. If political stability improves over the summer and trade disruption eases, market conditions may settle. But if conflict concerns persist into autumn, further pressure on pricing, availability and risk allowances is likely.

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