Persimmon has issued a warning over escalating supply costs linked to the Iran conflict, as demand for new homes begins to ease. The FTSE 100 housebuilder, one of Britain's largest, reported early signs of inflationary pressures within its supply chain, which could impact its finances as early as the second half of 2026.
Supply Chain Pressures
The company stated: "There are early signs of increased inflation in the supply chain, driven by higher energy costs, which are likely to impact the second half of 2026 and into 2027. We are looking to mitigate these where possible through our strong relationships with our suppliers and subcontractors." The warning comes as the Government relies on housebuilders to deliver its target of 1.5 million homes, but industry figures caution that building material costs could surge due to the Middle East conflict.
Resilient Sales Despite Headwinds
Despite the looming inflation threat, Persimmon reported that net sales per week are 3% higher than last year, with forward-looking sales up by 7% to £1.8 billion. The housebuilder confirmed it has yet to see any "material impact" from the ongoing conflict. Its share price climbed over 2% in early trading to 1,053p, as analysts praised the company's robustness.
Mark Crouch, analyst at eToro, commented: "Persimmon's update suggests a housing market that, for now, is holding firm, but the bigger picture for UK housebuilders is rapidly darkening. Persimmon's numbers look solid enough, forward sales up, pricing holding firm, and volumes broadly in line with expectations."
Consumer Confidence and Mortgage Rates
Property analysts have warned that expectations of interest rates remaining elevated for longer due to the Iran conflict have prompted Britons to delay home purchases, awaiting more favourable mortgage rates. Persimmon noted that enquiries for new properties have "softened slightly" in recent weeks, though sales have remained "resilient". The company stated: "We continue to be mindful of the potential effects on consumer confidence and affordability, with some increases in mortgage rates seen since early March."
Industry-Wide Caution
In its full-year update at the end of last year, Persimmon highlighted a "supportive" economic climate as the construction sector rebounded from Budget uncertainty. The company recorded an 11% rise in profit to £397 million for the year ending December. However, sentiment has shifted markedly since the Iran conflict began in February, with demand for home purchases hit by concerns over prolonged higher interest rates.
Earlier this week, Taylor Wimpey tempered its outlook with a cautious update, warning that construction costs could increase. Earlier this month, Barratt Redrow, Britain's biggest housebuilder, announced a significant reduction in land acquisition spending, citing the need for prudence amid the economic fallout from the Iran war. Meanwhile, Berkeley saw its share price tumble after halting land purchases entirely, citing an "unprecedented increase in cost and regulation."
