Steel, Timber and the Strait of Hormuz

2026 was supposed to be the year material cost inflation finally calmed down. After the double-digit spikes of 2022 and 2023, the BCIS had forecast a more manageable 2.5% to 3.5% rise across the year. Then the Strait of Hormuz changed everything.

A Shipping Disruption That Changed Everything

In early March 2026, three UK steel stockholders sent surcharge notices to customers within 14 days of each other. The increases ranged from 18% to 30%.

When shipping routes are restricted or politically unstable, the effects don't stay in the headlines - they show up in contractor invoices weeks later. Transportation costs rise. Delivery timelines extend. Suppliers pass those costs downstream.

One contractor pricing a highways drainage package in February 2026 found that between tender submission and contract award just weeks later, material costs had risen by £11,000 on a £290,000 package - before a single spade had gone in the ground.

Which Materials Are Under the Most Pressure

Not all materials are moving in the same direction - and that's part of what makes 2026 particularly difficult to navigate. Broad-brush cost assumptions don't hold anymore.

What This Means for Contractors Pricing Work Today

Fixed-price contracts in this environment push risk to the wrong place. A subcontractor with 8-10% margins cannot absorb a £25,000 material cost overrun on a £200,000 package. If they are forced to carry that risk, one of three things happens:

•       They inflate the tender price to cover it (you pay more)

•       They cut corners during construction to recover margin (you get lower quality)

•       They fail mid-project (you pay significantly more to get someone else to finish)

None of those outcomes is in the client's interest.

What the Best Contractors Are Doing

The Bigger Picture

The construction businesses that will come through 2026 in the best shape are the ones treating procurement not as an admin function but as a commercial discipline. Better supply chain relationships, faster tender cycles, and sharper cost visibility aren't luxuries in this environment. They're the difference between a margin and a loss.

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