MJ Gleeson warns building cost inflation prompting ‘high caution’

Housebuilder MJ Gleeson has sounded the alarm over building cost inflation, prompting “higher than usual caution” over its finances.

The London-listed firm said on Friday: “We have recently seen some softening in footfall and reservations, and limited increases in the cost of some materials.”

The effective blockade to the Strait of Hormuz caused by the Iran war has sent supply chain and energy costs soaring, and construction firms have warned this could push up the costs of building.

Housebuilders have also said fears of inflation are slowing demand for new homes, and MJ Gleeson said it has seen appetite begin to slump.

“This, together with ongoing challenges with planning and site viability, prompts even higher than usual caution in how we manage the business, including land investment decisions, into the next financial year,” chief executive Graham Prothero said.

But MJ Gleeson said it has seen solid trading at the start of this year, reporting net reservation rates higher than this time last year, of 0.88 compared to 0.86.

The housebuilder’s share price jumped more than two per cent on Friday’s open, to 234p, but the stocked remained down more than 44 per cent in the year so far.

Construction firms brace for inflation

Other construction firms have warned in recent days and weeks that the feared impacts of the Iran war on the industry have begun to kick in.

Proservice Building Services Marketplace also warned about challenges facing the construction industry on Friday as it posted revenue that fell short of market expectations.

The AIM-listed digital marketplace for building tools and supplies, formerly known as HSS Hire before the latter’s disposal last year, said on Friday it had seen “broader macroeconomic pressures – particularly within the UK construction sector, which has weighed on demand across parts of the Group’s end markets”.

Proservice saw a massive 18 per cent drop in its share price on Friday’s open, to 3.15p, pushing the stock to a 56 per cent fall in the year to date.

There is “an uncertain macro-economic backdrop which is having an impact on both our buyers and sellers,” the company added.

The company posted revenue of £248m for the year to end March, below analyst forecasts of £260m, and said its pre-tax earnings were “expected to be at breakeven.”

Building inflation could threaten homes target

Proservice said it was also facing difficulties in its efforts to refinance its £41m bank debt, with current facilities set to expire in September. “Wider macroeconomic and geopolitical issues have resulted in discussions taking longer than previously guided,” the company said.

On Thursday, FTSE 100 housebuilder Persimmon said it is beginning to see cost inflation enter its supply chain.

The company said: “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 government is leaning on housebuilders to clinch its 1.5m homes target, but growing building cost inflation is adding to existing doubts over whether this goal can be met.