Don’t lose nerve over yo-yoing oil price, T&T Alinea tells clients

Businesses should not lose their nerve over the impact of the Iran conflict on inflation and focus instead on maintaining the confidence which has been building in the industry since the new year, T&T Alinea has said.

Mark Lacey, who co-founded Alinea in 2013 prior to its acquisition by T&T, said the industry has been “very good at adapting and reacting to challenges that it’s faced through the years” including the crisis in Ukraine.

Lacey’s comments come as the price of oil dropped to around $90 per barrel this morning after spiking past $100 yesterday following a series of strikes by the US, Israel and Iran on petrochemicals facilities in the Gulf region.

“The really important thing here is to not be too bearish around this, because I think the industry has a really good habit, especially more recently, of navigating through these kinds of things and finding solutions,” Lacey said.

Lacey attended a Building Cost Information Service round table call with some of the industry’s “key commentators” yesterday, at which he admitted there had been “mixed views” on how to react to the oil price spike.

But while he said one cost consultant on the call had been “getting a bit too bearish”, he said most of those present had concluded it was too early to judge the impact of the conflict.

The call came ahead of an emergency statement in the House of Commons yesterday by chancellor Rachel Reeves, who warned that inflation was likely to increase over the next few months due rising energy prices.

The chancellor’s comments have added to fears that interest rate cuts that had been expected in the coming months will be delayed or become rate increases.

However, Lacey, who is one of the authors of T&T Alinea’s quarterly tender price forecast, argued that headline inflation does not always correlate to construction price brackets and tender price inflation.

He said the bigger issue was maintaining public confidence, adding: “I think it’s really important that we stay grounded on sort of facts and evidence. The industry has a habit of talking things up.”

Lacey said: “The investment market in terms of private sector investment has really turned a corner over the last couple of months. And at the moment I think people want to get on with stuff.”

He added: “I actually think navigating uncertainty and continual macro economic factors is actually what we should be doing, rather than necessarily always pointing to uncertainty as the root cause of all the issues.”

US president Donald Trump said yesterday that the war was “very complete, pretty much”, raising speculation that the conflict, which started last weekend, could soon come to an end.

However, this morning he threatened to bring “death, fire and fury” to Iran if the country continued to block shipping through the Strait of Hormuz, through which around 20% of the world’s oil travels.