In our annual round-up of developments in the construction industry, we summarise some of the headline developments in 2024, and our thoughts on how these and other key issues are likely to evolve in 2025.

Building safety

The industry has spent the last two and a half years familiarising itself with, and adjusting to, the Building Safety Act 2022 (BSA) – which was arguably the biggest legislative change to building safety regulation in a generation.

By the end of 2024, much of the reform brought about by the BSA had been brought into force. However, there are still some aspects of the new regime that are yet to be introduced – as well as indications that further reform may be on the horizon.

Grenfell Inquiry Phase 2 Report, and subsequent reports

One of the headline developments of 2024 was publication of the long-anticipated Grenfell Inquiry Phase 2 Report. This spanned almost 1700 pages and made some 58 recommendations for further building safety reform. Many of the recommendations, if implemented, would have significant implications for the construction industry. We previously examined these, and how they might impact the current regulatory framework as established by the BSA .

The Government's detailed response is expected in Spring 2025. However, in the meantime there have been two further notable publications:

  1. The National Audit Office's (NAO) report on dangerous cladding, published in November 2024, which examined the Ministry of Housing, Communities and Local Government (MHCLG's) remediation portfolio, and highlighted the slow pace of remediation in England.
  2. MHCLG's "Remediation Acceleration Plan", published in December 2024, which sets out its response to the NAO Report and intended approach to tackling the slow pace of remediation, including the aim that by the end of 2029:
  • all buildings 18 metres + in height with unsafe cladding which are in a government-funded scheme will have been remediated; and
  • all buildings 11 metres + in height with unsafe cladding will "either have been remediated, have a date for completion or the landlords will be liable for severe penalties".

In order to achieve these aims, the Plan indicates that there will be further building safety legislation in 2025: we describe this where relevant below, as well as in our article regarding the Remediation Acceleration Plan.

New building control regime for higher-risk buildings

The building control regime for the design and construction of "higher-risk buildings" (HRBs) in England, overseen by the Health and Safety Executive as Building Safety Regulator (BSR), has now been operational for over a year. There have been some teething problems, and we understand that clients are having to factor substantial delays into their programmes due to resource constraints at the BSR. However, although still evolving, the market position has also started to become clearer as to how building contracts for HRBs falling within the new regime will allocate risk and responsibility for various elements of that regime, including Gateways 2 and 3, the 'Golden Thread', the new change control process, etc.

The regime applies to HRBs, i.e. buildings which are at least 18 metres tall (or have seven or more storeys) and in England, contain at least two residential units, or are care homes and hospitals. However – the Grenfell Phase 2 Report calls for this definition to be "reviewed urgently", criticising the "arbitrary" focus on the height of a building. It considers that other critical factors such as the building's use and the presence of vulnerable individuals are "more relevant".

It remains to be seen how such a change in definition – which refers not only to defined criteria such as building height, but also subjective and potentially shifting criteria such as the occupancy of any given building – would operate in practice. Changing the definition would also have significant ramifications for the industry, increasing the number of buildings classified as HRBs and the corresponding workload for the BSR.

Registration of occupied HRBs – and potential extension of registration requirement?

Registration of occupied HRBs has now also been in force for almost two years, following the opening of the registration portal in April 2023. The BSR's 'call in' of safety cases is now well underway. In our webinar on managing building safety in occupied HRBs, our experts delved into the key aspects of the 'in-occupation phase' of the new regime and outlined steps that need to be taken by accountable persons to ensure compliance with the new requirements, as well as the consequences of failing to do so.

Reform is also expected in this area: the Remediation Acceleration Plan notes the gap in knowledge regarding residential buildings between 11-18m in height (i.e. not currently HRBs) and confirms there will be new legislation to:

  • Require mandatory registration of all residential buildings between 11-18m in height. Once complete this will mean that there is a "complete register" of all residential buildings above 11m; and
  • Ensure the "strongest possible penalties" for those that do not comply.

The current proposals refer only to registration of these buildings, so we await further detail when the draft legislation is published whether any of the ongoing safety management and reporting requirements in respect of HRBs will also apply to 11-18m buildings.

Review of Building Regulations Guidance and amended Approved Document B

In December 2024, MHCLG also announced a fundamental review of how building regulations guidance – also known as "Approved Documents" (ADs) – is produced, updated and communicated to the construction industry. This follows criticisms of the ADs in both Dame Judith Hackitt's 2018 Independent Review of Building Regulations and Fire Safety (which called them "complex, ambiguous and not user-friendly") and the Grenfell Phase 2 Report.

There is currently limited detail on what this review will comprise, save that it will be undertaken by the BSR who will establish a review panel in early 2025. A recent BSR update also indicates that a public consultation is expected by early Autumn.

Construction products

Reform of construction product regulation, as detailed in the BSA, is one of the elements of the BSA that remains to be brought fully into force. As we explained in more detail in our article discussing the regulation of construction products, although the BSA makes provision for this, no new regulations have as yet been published (save for an early draft which is now withdrawn). If and when regulations are published, it is expected that they will (as outlined in the BSA), amongst other things:

  • introduce a general safety requirement, prohibiting construction products from being placed on the market unless they are safe products, meaning that they do not present a risk to the health and safety of people, or the risk is as low as possible;
  • create a new category of "safety-critical" construction products, where "any failure of the product would risk causing death or serious injury to any person", and more stringent regulation of such products.

Spotlight on the Defective Premises Act 1972 (DPA)

A little-used piece of legislation prior to the BSA, the DPA has been deployed by claimants – and developers in the case of URS v BDW (see below) – in a number of recent and ongoing cases before the courts. In a previous article on the key talking points in the construction sector for 2023, we described the retrospective extension of the limitation period under the DPA from six to 30 years, and the prospective extension from six to 15 years (as well as the widening of its scope) as some of the most well-documented and controversial changes brought about by the BSA, section 135.

Hot off the press is the TCC decision in late December 2024 in BDW Trading Ltd v Ardmore Construction Ltd [2024], in which the TCC confirmed that disputes "under the contract" will encompass DPA claims, which can be referred to statutory adjudication. This is significant and is likely to lead to an increase in the number of adjudications concerning historical fire safety defects.

In early December 2024, the Supreme Court heard the appeal in URS v BDW and its decision, expected in Spring 2025, will bring the DPA further into the spotlight. The Court of Appeal had held amongst other things that:

  • Developers are owed (as well as themselves owing to subsequent purchasers) a duty under section 1 of the DPA;
  • Section 135 of the BSA is retrospective in effect; and
  • While there is an exception addressing claims which have been "finally determined by a court" by the date the BSA came into force, there is no exception relating to the rights of parties in ongoing litigation.

Subject to the outcome of the appeal, we expect to see an uptake in litigants seeking similar amendments, or commencing proceedings to revive previously time-barred defects claims under the DPA.

Remediation Orders / Remediation Contribution Orders

Starting in 2023 and throughout 2024, a number of Remediation Order (RO) and Remediation Contribution Order (RCO) applications came before the First-tier Tribunal (FTT). These form part of what are collectively referred to as the "leaseholder protections" established by the BSA. They aim to protect leaseholders in multi-occupied residential buildings from the costs associated with remediating historical building safety defects.

RCOs allow the FTT to order a company (a landlord, a developer or an "associated" person) to make payments in connection with the remediation of relevant defects if the FTT considers it "just and equitable" to do so. There is however still very little judicial guidance on a number of matters concerning interpretation – particularly the meaning of "just and equitable".

The FTT handed down a landmark decision in January 2024 on the first substantively contested Remediation Contribution Order (RCO) relating to five apartment buildings in the former Olympic Village in Stratford in East London. We acted for the successful applicant, Triathlon Homes LLP, in this case, in which the FTT concluded that it was "just and equitable" to make an order against the original developer and its well-capitalised parent.

The FTT decision in Triathlon has been appealed and will be heard by the Court of Appeal in Spring 2025, which will shed greater light on the various statutory definitions and in understanding how the Courts will apply the BSA in practice.

Building Liability Orders

Cases involving Building Liability Orders have been relatively limited so far, but these are likely to make their way through the courts in 2025. These are orders which may be made by the High Court – again, if it considers it "just and equitable" to do so – which 'pierce' the corporate veil and extend certain types of liability for defective construction work to associated entities such as parent or group companies.

Just before Christmas 2024, the High Court handed down its first finding of a "relevant liability", which will allow the claimants in that case to pursue a Building Liability Order (to be heard at a future hearing).

Second staircase in residential buildings

In March 2024, the Government published amendments to Approved Document B (Fire Safety). These confirm the requirement for more than one common staircase to be provided in residential buildings of 18 metres plus – although there will be a 30-month transition window until 30 September 2026 before this is fully in force.

This update provided some clarity as to the timeframes and transitional arrangements that will apply to the much anticipated second staircase requirement (particularly where planning permission has been granted based on a single staircase solution), and the specific technical guidance that will be in place once that transition period ends. We provided further detail in an article discussing the Government's published amendments to Approved Document B (Fire Safety).

Building Safety Levy

The last consultation on the levy took place some time ago and questions had been raised about whether it was still going to be implemented – but the recent "Remediation Acceleration Plan" confirms the intention for it to come into force in Autumn 2025. It also confirms that the Levy will be charged on all new residential developments in England that require building control approval, irrespective of their height. Further operational details of the Levy, as well as which developments will be in scope and any exemptions, will become clear when draft legislation is published in 2025.

Insolvency and supply chain uncertainty

In the UK construction sector, insolvencies remain high. Similar to 2023, 2024 was unfortunately characterised by a number of further high-profile contractor insolvencies.

The Insolvency Service reported that the construction sector experienced the highest number of insolvencies of any sector in England and Wales in the 12 months to October 2024 (with 4,208 company insolvencies reported, or 17% of all company insolvency cases). Although this marks a slight decrease on 2023 (when 4388 company insolvencies were reported in the sector), it is significantly higher than the number of insolvencies recorded in the sector in the years between 2014-2021 when insolvencies in the sector were generally under 3000 per year.

We have continued to advise our clients throughout 2024 on measures that can be adopted to provide for pressures and uncertainties in their contracts. In our article on insolvency in the construction market, we described some of the steps and measures that can be put in place at the pre-contract stage to safeguard against the risk of insolvency in circumstances where the most common forms of 'third party' security, i.e. performance guarantees / bonds, are not available. We are now seeing a shift to more consideration being given to protections against supplier and employer insolvency, for example, the viability of direct payment mechanisms and tools that can be employed where projects are 'in-flight' to spot and mitigate against the risk of struggling suppliers and employers. Finally, retentions / prompt payment are also back in the spotlight: procurement law mandates prompt payment in public contracts (in both the Public Contracts Regulations 2015 and also, from 24 February 2025, in the Procurement Act 2023 which we cover below on changes to public sector procurement rules). We described this in an article regarding the new secondary legislation to mandate reporting on retentions, together with the announcement of further legislation in October 2024 which – although it will not go so far as to mandate prompt payment in the private sector, will require large companies to report on their payment practices and policies (including, from 1 March 2025, retention practices).

Please get in touch if you would like advice on early warning signs of insolvency in the supply chain, and practical steps that you may take pre-insolvency, on insolvency and post-insolvency. We can also assist in drafting terms into your contracts prior to them being let, that will help mitigate against consequences of insolvency.

Collateral warranties

The Supreme Court issued a landmark decision in July 2024 in Abbey Healthcare (Mill Hill) Ltd v Augusta 2008 LLP (formerly Simply Construct (UK) LLP), bringing welcome clarity to the question: is a collateral warranty a "construction contract" under Part II of the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act), so as to give rise to a right to statutory adjudication?

Following uncertainty on this point after the earlier Court of Appeal and TCC decisions, the Supreme Court confirmed that "most" collateral warranties will not be construction contracts. Following this decision, it is clear that collateral warranties will (generally) fall outside the scope of mandatory statutory adjudication under the Construction Act – however it remains open to parties who wish to have the right to adjudicate to opt into this by drafting it into a collateral warranty.

Changes to public sector procurement rules

Procurement law in England, Wales and Northern Ireland is set for wholesale overhaul from Monday, 24 February 2025, when the Procurement Act 2023 comes into full force. Four sets of current procurement rules are due to be swept aside and replaced by a new, single procurement rulebook. The Act marks the UK's biggest shake-up of government contracting rules for decades.

How will the new regime differ from the old? While the Act consolidates a number of existing regulations, there is much that is new. Focused on clarity, transparency, value and fairness, the Act seeks to introduce many improvements – including greater flexibility, a more competitive process for contracts and improved data on procurements. And with certain sector-specific provisions made and exclusions applied, it is important that each organisation considers what the Act will mean for them.

Have you already begun to update your policies and procedures? Are you familiar with all the new notices required and when and how they apply? Have you considered what changes apply at each stage of a procurement and how requirements might vary by contract type? Could you benefit from additional training and scenario planning in case of challenges along the way? The Act's revised implementation date of 24 February 2025 still allows time to prepare. Our Procurement Act Toolkit can help you get to grips with the new legislation, follow best practice and gain practical tools to support you throughout the lifecycle of a procurement.

Net zero, sustainability and environmental, social and governance

Climate change, advances in technology and processes, and the national target to achieve net zero carbon emissions by 2050 mean that sustainability and environmental, social and governance (ESG) issues remain high on the agenda in the construction sector. How can net zero requirements be balanced with increasing demand?

We recently hosted a webinar discussing key ESG considerations in the construction sector, including:

  • Key ESG challenges and where risks and rewards lie within the construction industry;
  • Best practices for creating social value and embedding it within projects;
  • Client perspectives on managing ESG issues effectively across the supply chain; and
  • Emerging litigation trends in ESG and potential areas of dispute.

One recent important development in the industry is the publication of the pilot Net Zero Carbon Buildings Standard (NZCBS) in 2024. This aims to provide a consistent approach to assessing whether a building can be defined as Net Zero Carbon (NZC). The UK NZCBS explains that the standard will be for "anyone who wants to either fund, procure, design, or specify a Net Zero Carbon Building and anyone wanting to demonstrate that their building is 'Net Zero'-aligned with an industry-agreed Standard."

A further noteworthy development came in the Autumn 2024 budget, when the Government announced that it would be introducing a Carbon Border Adjustment Mechanism (CBAM), which will come into force on 1 January 2027. This will be similar to the EU CBAM scheme, whereby importers of certain products (currently likely to be aluminium, cement, ceramics, fertiliser, glass, hydrogen, iron and steel) which have a particularly carbon-intensive production process will pay an import charge on those products when bringing them into the EU. Further detail on the mechanism and its likely cost impact for supply chains in the UK will become clearer when the Government publishes drafts of the relevant legislation.

Retrofit – the process of modifying the majority of an existing building's systems and / or structure after its initial construction, as opposed to demolishing and rebuilding – also came under the spotlight in 2024. The long-running case involving Marks and Spencer's (M&S) flagship London store on Oxford Street remained in the headlines, with the latest development being the Secretary of State's decision to approve the demolition and proposed new scheme.

We published a podcast interview with Will Hurst, Managing Editor of the Architects' Journal, summarising what retrofit is, the regulatory backdrop, key developments and the challenges and opportunities for businesses and professionals operating in this sector. In a further podcast, we spoke with Andrew Carpenter, Chief Executive of the Structural Timber Association, about sustainable timber, the response from industry and investors to its use and initiatives to increase more home-grown sustainable timber to help meet net zero goals.

Joint Contracts Tribunal 2024

The Joint Contracts Tribunal (JCT) started publishing its new 2024 suite in April 2024, with the remainder to follow in 2025, including the new Target Cost Contract family. As we reported on throughout the year, the 2024 forms published so far include the Design & Build, Minor Works, Intermediate Building Contract, Standard Building Contract, Pre-Construction Services Agreement, Repair and Maintenance, Major Project Construction, Prime Cost, Constructing Excellence, and Measured Term contracts.

As described in more detail in our insights linked above, the 2024 contracts are not wholesale revisions of the existing 2016 forms and the changes are unlikely to materially affect risk allocation in practice. Several of the amendments reflect recent market developments including the requirements of the BSA (mainly the dutyholder and competence regime as described above) as well as the greater focus on sustainability. However, the JCT has not included any drafting catering for the new building control regime for HRBs: further advice should be taken in respect of the specific requirements and approach to risk allocation when procuring such projects.

International Federation of Consulting Engineers

There are also various new International Federation of Consulting Engineers (FIDIC) publications expected in 2025, including a Carbon Management Guide for use with FIDIC 2017 forms, which we understand will contain a standalone clause addressing the management and measurement of whole life embedded carbon, together with a 'Schedule of Carbon Emissions'. Broadly similar to NEC's Option X29, it remains to be seen whether FIDIC will go one step further and introduce any contractual consequences for failure to meet the carbon management expectations / requirements: this would be an industry first.

Other expected publications include PPP 2.0 Model Contract Principles, which are being developed by another of FIDIC's task forces, with the Model Contract itself to follow, the new Collaborative contract, EPCM form and the anticipated standard form contract for offshore wind – dates of these remain to be confirmed although the offshore wind form is now not expected until 2026.

If you have any questions about this article, please contact Michael O'Shea, Daniel Wood, Ruth Griffin or Gemma Whittaker.