There is an old saying in business that turnover is vanity, profit is sanity, but cash is king. Nowhere is that more evident than in construction, and never more so than now, as conflict in the Middle East disrupts supply chains, energy markets and project finance.

Construction is inherently cash-hungry. Firms buy materials before they build, build before they invoice, and invoice before they are paid. That delay can stretch for months and can sink otherwise healthy businesses. In a geopolitical shock, pressure on working capital becomes existential.

The latest conflict has hit every construction cost line. The Strait of Hormuz, a critical oil route, has become a flashpoint, prompting shipping rerouting and higher risk premiums. The result is familiar: higher crude prices, costlier transport and renewed inflation across construction inputs.

Steel is especially exposed because it is both energy-intensive to make and sensitive to transport disruption. When oil rises, production and freight costs rise with it. For contractors, that means higher landed prices, longer lead times and greater pressure on both programme and margin.

The latest RICS UK Construction Monitor says material costs are expected to rise by 7.5% over the next year, while tender prices are forecast to increase by 5.6%. Two-thirds of respondents cited financial constraints as the biggest obstacle to activity, underlining how quickly cost inflation becomes a liquidity problem. (www.rics.org)

Construction margins were never generous. Even before the current crisis, one delayed payment, one sharp rise in materials or one supply-chain failure could turn a profitable job into a cash crisis within weeks.

That risk is now multiplied. Force majeure clauses are being tested, contracts without proper price-adjustment mechanisms look dangerously thin, and developers facing higher costs and tighter credit are slowing activity. RICS reported in the UK a net balance of -11% for new work in Q1 2026. (www.rics.org)

For contractors in this environment, the only real buffer is cash: not profit on paper and not receivables in an ageing ledger, but liquidity in the bank.

Ireland is a strong example of the tension between demand and delivery. CSO data showed construction output rising by 4.9% in early 2025, while the workforce reached 193,000, its highest level since 2012. Public investment remains supportive, with €7.2bn allocated to housing, but the delivery challenge is steep: Ireland needs to move from roughly 36,000–37,000 completions a year to about 50,000 by 2030. (www.cso.ie)

But this conflict arrives at exactly the wrong time. The Construction Industry Federation has warned of renewed concern across the industry about volatility in fuel and materials costs, while the wider risk is clear: if energy shocks feed into construction inflation, output and housing delivery will come under pressure. (www.cif.ie)

Ireland is structurally exposed because it imports most construction materials and is highly sensitive to energy and transport costs. Steel, cement and aluminium all face price pressure from fuel, freight and carbon-related costs. Arcadis expects Irish construction inflation of 3% to 5% in 2026 and 4% to 6% in 2027. For firms on fixed-price or weakly indexed contracts, those are not abstract forecasts; they are direct threats to margin. (www.arcadis.com)

The underlying demand in Ireland is real, and the public pipeline provides visibility that many markets lack. But demand does not pay subcontractors. Cash does.

The lesson for construction businesses, whether operating in Riyadh, Ringsend or anywhere in between, is simple: cash reserves are not idle capital; they are strategic armour.

In practice, that means milestone-based contracts with clear payment triggers, close tracking of cost movement, realistic contingencies on import-heavy packages and stronger focus on cash collection and working  capital discipline.

The bottom line is this: in a stable market, contractors might survive on tight margins and clever financing. In the market now taking shape, with conflict driving volatility in oil, shipping and materials, only firms with genuine liquidity have the flexibility to absorb shocks and keep building.

Whether the project is housing in Cork, commercial development in Dublin or major infrastructure elsewhere, the principle is the same: cash is king, and in a volatile market it may be the difference between survival and insolvency.

*Note: This is a marketing article from Howden Insurance. The information in this guide is accurate at time of publication. This content is provided for general information only and does not constitute financial or insurance advice.

Author: Colm McGrath, Executive Director, Head of Surety Ireland, Howden

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