UK Construction Market Report 4Q 2024
Hot topics
Key statistics:
Workplace assistance
of respondents said they have used an artificial tool to support a workplace activity.
Net zero
of respondents think that the UK Net Zero Carbon Buildings Standard will be adopted on their projects.
Grenfell Tower Inquiry
Trust can be rebuilt in the construction industry following the Grenfell Inquiry’s final report findings, according to 82% of respondents.
The report included a series of recommendations to reverse some of the deregulation that allowed the fire to occur across different stages. A single independent regulator would oversee the industry, and a chief construction advisor would be appointed to flag concerns about building regulations and the wider industry.
If trust is to be rebuilt, the industry and government must show progress against the recommendations made or risk “sleepwalking” into another tragedy.
Amit Oberoi, executive chairman of the Considerate Constructors Scheme (CCS), warned in November 2024: “We want to sound the alarm that we are still sleepwalking towards the next industry tragedy. The Grenfell fire occurred because of a culture of chasing profits over performance and speed of delivery over safety.”
The comments reflect frontline construction staff telling the CCS they are deterred from speaking out about dangerous or sub-optimal materials amid a “culture of silence.”
Supporting comments in our survey also point to a “race to the bottom” on costs and the industry requiring a “cultural overhaul where safety becomes embedded as a core value.”
Others point to compliance with the Building Safety Act as leading to greater accountability while improving trust in practices. However, the wider consensus was that restoring public confidence would be a long process, requiring consistent improvements in safety practices and ethical accountability.
According to the latest government data, there are 4,834 residential buildings 11 metres and over in height identified with unsafe cladding across England, with 50% still requiring remediation works to commence. The Budget allocated £1 billion of investment to remove dangerous cladding.
Meanwhile, Deputy Prime Minister Angela Rayner has set out the Remediation Acceleration Plan, directing owners of unsafe residential buildings over 18 metres to commence cladding works by 2027 and complete remediation works by the end of 2029.
For buildings over 11 metres, the target by 2029 will be remediation or a set date for completion or be liable for penalties.
Current estimates suggest that between 4,000 and 7,000 buildings in England have unsafe cladding yet to be identified. The plan aims to identify these buildings by conducting advanced data assessments and creating a comprehensive building register.
Building Safety Act: Gateway 2 focus
The Building Safety Act was created to improve safety standards in the built environment through a series of gateways.
As of 1 October 2023, Gateway 2 serves as a critical holding stage in the building control process for High-Risk Buildings (HRBs) in England, separating the design phase from construction.
Placing an onus on design teams to outline how compliance with functional building regulations will be achieved, a complete application to the Building Safety Regulator (BSR) is now mandatory. Construction cannot legally commence without BSR’s formal approval.
Gateway 2 applications must include comprehensive plans, specifications and schedules detailing the planned work — organised in a reference file, along with supporting documents as required by Regulation 4 of the HRBs Regulations.
Crucially, the BSR requests both the narrative and supporting evidence explaining compliance and ultimately safeguarding the integrity of the building's safety features.
While the BSR initially aimed to process applications within 12 weeks for new HRBs and eight weeks for existing HRBs, processing times have reportedly extended to 28 weeks due to an unexpected influx of applications and poor-quality submission documentation.
Programme timelines for new building HRBs typically include a 6–9-month window for Gateway 2 approval and sign-off.
Once construction commences, Gateway 2 ensures that the practical implementation of the approved design adheres to the required safety standards and requirements and does not deviate from the original design.
The BSR’s current approval rate reflects the pressure on the regulatory system: a recent FOI request confirmed that between October 2023 and September 2024, only 14% of Gateway 2 applications were approved. This low approval rate and a significant backlog are causing challenges across the industry.
Delays also affect investor confidence, with funders increasingly hesitant to commit to projects until Gateway 2 approval has been granted.
Developers have become increasingly cautious about initiating high-risk projects. Subsequently, there is a shift toward lower-density projects, often under eight stories, as developers seek faster approvals and fewer regulatory hurdles, which could ultimately further exacerbate the nationwide housing supply challenge.
Climate crisis/COP29
COP29 concluded with an increase in the New Collective Quantified Goal (NCQG) on Climate Finance by 2035 for developing nations — rising to £240 billion per year from the previous settlement of £79.8 billion.
The NCQG ought to open opportunities and have a considerable impact on the construction industry in the targeted countries. For developing nations, adapting to climate change will necessitate substantial investments in green energy initiatives — enhancing the energy efficiency of current buildings and integrating carbon capture technologies into existing infrastructure.
The funding from the NCQG should support these efforts to a widely debated extent. Additionally, major infrastructure projects funded by the UN's smaller Green Climate Fund provide insight into the types of initiatives that the NCQG is likely to finance.
Prime Minister Keir Starmer outlined the government's intention to make the UK a global leader in tackling the climate crisis — aiming for an 81% reduction in UK emissions by 2035, based on 1990 levels.
His speech emphasised the importance of actively addressing climate change, presenting it as both a critical necessity and a chance for economic revival.
Funding was announced for carbon capture projects on Teesside and Merseyside, which aim to leverage the expertise of oil and gas workers in the shift towards clean energy.
Additionally, a Clean Industry Bonus to incentivise offshore wind developers to the tune of £27 million per gigawatt (GW), rising to £200 million for a 7–8GW scheme, is a measure the government hopes will encourage investment in coastal communities to build more sustainable offshore wind blades, cables and ports.
UK Net Zero Carbon Buildings Standard
A slight majority (59%) of respondents knew of the UK Net Zero Buildings Standard, and nearly two-thirds (62%) said it would be adopted on their projects.
As a cross-industry collaborated standard, it will act as a rulebook defining the requirements for UK buildings to be considered net zero carbon aligned — considering carbon and energy usage.
The pilot testing scheme is due to start early in 2025, following expressions of interest for buildings suitable as pilot projects.
Subject to pilot testing, the industry will keenly observe the subsequent voluntary uptake now that a common methodology is available.
Survey respondents expressed some optimism in this respect, though dependent on cost and client requirements.
Insurance and bonds
The majority of respondents (72%) said their projects did not experience issues obtaining insurance or bonds in the previous quarter.
However, supporting comments highlight higher costs associated with obtaining them and requirements being too onerous for some contractors.
Several large surety bond providers have recently pulled out of the construction market, with the latest being QBE. Major contractor collapses such as ISG have created a more cautious appetite among providers.
Financial stability is a necessity as insurers take a closer look at finances, with project viability a concern if major contractors struggle to secure adequate coverage, as noted by just over a quarter of respondents.
One trend noted by respondents is that contractors are instead increasingly offering parent company guarantees, where available, due to cost limitations. However, due diligence is required to check the suitability of these in meeting the client's requirements.
Procurement Act
The Procurement Act 2023 is now due to “go live” on 24 February 2025 — delayed from the initial date of 28 October 2024. According to the government, the delay was to enable the formation of a new National Procurement Policy Statement (NPPS) that aligns with its priorities and establishes a “mission-led” framework. The new draft of the NPPS will then go through consultation before being passed through parliament.
Once in force, the Act will improve transparency in government procurement processes, with the aim of delivering better value for money and a greater focus on social value.
For the construction industry, bidding on public projects should be more efficient through the Central Digital Platform, which could open opportunities for SMEs by simplifying the bidding process.
Until then, organisations will need to decide whether to proceed under the existing legislation or delay the process until next year.
Extension to CE marking
Until September 2024, the withdrawal of the recognition of the European Union CE (Conformité Européenne) Mark for construction products was due on 30 June 2025. However, Rushanara Ali, former government minister for Building Safety and Homelessness, announced the indefinite extension of the recognition period for CE marking in the UK market.
The government has committed to system-wide construction product regulatory reform, with UKCA (UK Conformity Assessed) marking remaining as a valid and accepted regulatory mark until further review.
Recognising that discontinuing the recognition of CE marking without reforming the domestic system would lead to trade barriers and adversely impact product supply led to the deadline extension.
Changes to the recognition of CE marking would be subject to a minimum two-year transitional period.
The Independent Review of the Construction Products Testing Regime also found that testing and certification bodies lack the necessary resources to effectively manage the transition to exclusive UKCA markings on manufactured construction products.
Trump presidency
During Donald Trump’s first term as president, “the only certainty is uncertainty” was often attributed as his administration’s status quo.
The impact of Donald Trump’s presidency on the UK construction industry, therefore, remains to be seen but will likely be measured by how protectionist the new US economic stance will be. The US is one of the few countries with which the UK has a trade surplus in goods.
Analysts predict the UK’s exports might drop by over 2.6% if 20% tariff proposals are implemented — leading to a £22 billion decrease.
Measures such as limiting freedom of movement between countries for professionals could worsen skills shortages in both countries. Undocumented workers make up nearly a quarter of the construction labour force nationwide in the US.
Tariffs would also affect construction costs, as over a third of the US’ construction materials are imported from overseas.
A Federal Reserve working paper published during Trump’s first presidency found that US export growth lowered as a result of supply chain spillover whereby prices of input components increased via retaliatory measures. US manufacturers paid USD 1,600 in extra tariff costs per worker.
Therefore, increasing the price of foreign goods and whether the UK negotiates a deal or reciprocates creates risks and uncertainties — providing another headwind for the economy and construction industry to navigate.
Digital tools and AI
A slight majority of respondents (39%) said they had not used ChatGPT or another AI tool to support workplace activities. However, just over four in ten respondents have used such tools, in keeping with last quarter’s 41% who said the same.
With more choices and each new version of AI tools bringing improvements in understanding context or minimising errors, as well as companies investing in their own internal offerings, we expect uptake to rise further.
Most respondents (80%) said the lower range of 0–25% of their projects use digital tools and AI. The opportunity, therefore, for further implementation of AI in project delivery is considerable.
The global building information modelling (BIM) market was estimated at USD 8.6 billion in 2023, with projects indicating it to reach USD 24.8 billion by 2030 — a compound annual growth rate of 16.3%. Digital tools and AI increase efficiency, reduce costs and improve site safety via, for instance, drones and robotics. The integration between different tools is also improving rapidly, offering further productivity gains.
However, successfully implementing digital tools and AI can require significant upfront costs, a barrier to entry for an industry that operates under narrow cashflow and profit margins. A lack of skilled labour was also cited as a main obstacle in our Global Digital Construction Outlook survey earlier this year. Training employees to use digital and AI tools is crucial to maximise the benefits.
© 2024 Gleeds - all rights reserved
Gleeds privacy policy | Cookie Policy | Modern slavery & human trafficking statement | Equal opportunities & diversity policy