Barratt warns Iran war is causing high energy prices and soaring building costs

Barratt Redrow has warned that rising construction costs and persistently high interest rates could weigh on the housing market, as geopolitical tensions in the Middle East drive up energy and material prices.

Britain’s largest housebuilder said that while build cost inflation is expected to remain broadly in line with its guidance of around 3 per cent for the second half of the financial year to June, pressures are likely to intensify into 2026–27.

The caution comes amid the economic fallout from the Iran conflict 2026, which has pushed up global oil prices, increasing fuel and energy costs and feeding through into the price of raw materials.

Barratt said that “higher energy costs are likely to be reflected in increased building material costs in 2026–27,” underlining concerns that inflationary pressures across the construction sector are far from over.

Despite this, the company insisted that trading for the current year remains on track, with the direct impact of the conflict so far described as “limited.” However, it acknowledged that the outlook beyond this financial year is becoming more uncertain, particularly if elevated energy prices persist.

The group, formed following its £2.5 billion acquisition of Redrow in 2024, said it expects to provide further detail on cost inflation and market conditions in its full-year trading update in July.

Barratt Redrow said: “The ongoing conflict in the Middle East is contributing to increased economic uncertainty, including the potential for a more prolonged, higher interest rate environment and renewed cost pressures.

“While we currently expect any direct impact on 2025-26 to be limited, visibility beyond the current financial year remains more uncertain.

“In this context, we are closely monitoring developments while maintaining a disciplined approach to capital allocation, land investment and cost control, ensuring we retain the flexibility to adapt to changing market conditions.”

In an effort to offset rising costs, Barratt is pursuing a £100 million cost-saving programme over three years, targeting efficiencies across its operations and supply chain. The company expects to deliver £50 million of savings this year, with the remaining £30 million anticipated by 2026–27.

The warning highlights the fragile balance facing housebuilders, as they contend with higher borrowing costs, constrained affordability for buyers, and renewed inflationary pressure driven by global events.