The UK construction industry plays a vital role in the economy, employing almost one in ten workers across the country. Although recent years have seen a decline in construction activity, the market is expected to rebound by 2025. This optimism is based on several factors, including shifts in economic conditions, changes in government, and ongoing advancements in technology.
A significant factor driving growth is the anticipated decline in interest rates, which have already dropped following the Bank of England’s August 2024 base rate reduction. This decrease is expected to continue through 2025, aided by falling inflation. Such economic trends typically lead to increased private investment, with construction often one of the first sectors to experience the benefits. The newly elected government has also set ambitious targets to build 1.5 million new homes, which, if achieved, could further boost construction activity.
In terms of innovation, the sector is witnessing rapid technological advancement, particularly in modular construction and off-site manufacturing. The rise of artificial intelligence and other technological tools is influencing both construction methods and the types of assets being developed. Many UK construction firms are investing in these innovations, which may require new forms of contracts and legal frameworks. However, this technological shift could also result in disruptions, leading to new types of disputes that will need innovative resolution approaches.
The UK construction industry has long been a leader in alternative dispute resolution (ADR), and recent court rulings, along with changes to court rules, are reinforcing the trend towards mediation. The Technology and Construction Court (TCC), known for its expertise, is expected to continue playing a key role in resolving complex construction disputes, often through ADR methods.
Sustainability goals, especially the UK’s commitment to achieving net zero by 2050, are also driving changes within the sector. Despite recent indications of a slight slowdown in policy implementation, the construction industry must make significant strides to meet these targets. Practical adjustments across all stages of building are necessary to align with environmental regulations.
While the Private Finance Initiative (PFI) is no longer the preferred delivery model in the UK, its global use continues to ensure that UK-based experts remain involved in international projects. PFI disputes, especially those involving multi-party and multi-tiered conflicts, are still common, particularly as long-term projects reach their hand-back phase. This involves complex legal processes, such as asset valuation before transferring ownership back to the public sector, which often leads to disputes.
The Building Safety Act 2022 is expected to have a lasting impact on the industry. The legislation, combined with the Grenfell Tower inquiry findings, introduces strict safety regulations at every stage of construction. With a 30-year retrospective limitation period for claims, building safety issues will likely remain a central concern in the coming years. This new legal framework is also reshaping contracts and procurement processes, with the courts likely to see an increase in related litigation.
On the international stage, the UK’s construction market continues to attract global players. English law remains a popular choice for international construction contracts due to its predictability and fairness, as well as the expertise of the UK’s specialised courts. The TCC has seen a surge in cases, highlighting the UK’s strong reputation in resolving complex international construction disputes.
The UK construction sector is set for growth, driven by economic factors, technological advancements, and evolving legal frameworks. With its global leadership in contracting, innovation, and dispute resolution, the industry is well-positioned to navigate future challenges and opportunities.
Hercules Site Services plc (LON:HERC) is a collaborative, innovative company delivering services of the highest standards within the Civil Engineering sector of the construction industry. Hercules Construction Academy provides a comprehensive range of courses designed to equip individuals with the essential skills and knowledge required for a long and successful career in the construction industry.
