Horizon Scanning: What’s happening in Construction (England and Wales) in 2025?

General outlook for construction

The Government has announced its Plan for Change, which contains ambitious plans to fast-track planning decisions on over 150 major economic infrastructure and to construct 1.5 million homes across England over the course of this Parliamentary term. To support this programme, the Autumn 2024 budget committed an extra £500 million to the Affordable Homes Programme and £3 billion of additional support for SMEs and the Build to Rent sector in the form of housing guarantee schemes to support the private housing market.

The Government will establish and fund a new entity called the National Infrastructure and Service Transformation Authority, which will be responsible for improving the delivery of infrastructure nationwide. This should assist infrastructure projects such as the TransPennine Route upgrade between York and Manchester, East West Rail (to connect Oxford, Milton Keynes and Cambridge) and HS2 trains to Euston.

In addition, the Government intends to publish ten-year strategies for housing and infrastructure in Spring 2025, detailing key priorities and a project pipeline for investors and supply chains. Data Centres have been designated as critical infrastructure and so are likely to be pushed through in 2025.

Against these ambitious schemes, the sector will be under increased pressure due to limited workforce availability, the ongoing fall out from main contractor insolvencies (such as ISG) and the increase to Employer’s NI contributions from 6 April 2025.

The Procurement Act 2023 is expected to come fully into force on 24 February 2026. Whilst it consolidates a lot of existing law it will introduce KPIs and performance management for contracts over £5m and have an increased focus on competency. Further legislative updates are also expected with the following Bills that are currently being considered by Parliament:

• Arbitration Bill 2024-2025
• The Building Regulations (Minimum Standards) Bill 2024-2025, to introduce minimum quality and energy efficiency standards for the building of new homes.
• The Domestic Building Works (Consumer Protection) Bill 2024-2025, to introduce a licensing scheme for builders undertaking domestic building works in England to protect consumers and promote fair competition among reputable builders.

Supreme Court decisions

The Supreme Court’s decision in URS Corporation Limited v BDW Trading Case Limited is expected following its hearing in early December 2024. The main issue in dispute is whether developers can claim against contractors/consultants under s.1(1) Defective Premises Act 1972, or whether this right is limited to purchasers of properties. This has great significance in the aftermath of the Building Safety Act 2022. Many developers have undertaken building safety remedial work at properties they no longer own. If they do have rights under the DPA, this would entitle them to seek recovery from contractors/consultants under the longer limitation periods offered by the DPA where a contractual duty may not exist or have expired.

The Supreme Court has granted permission to appeal the decision in Providence Building Services Limited v Hexagon Housing Association Limited. This dispute concerns the interpretation of clause 8.9.3 of the JCT Design and Building Contract 2016 and whether Providence could terminate its contract after Hexagon failed to pay an invoice on time, even though Hexagon had paid up within 28 days of receiving a previous default notice. No date has yet been set for the hearing, but it is expected to be held in 2025.

Building safety

Whilst most of the provisions of the Building Safety Act 2022 are now in force in England, there are some that remain outstanding and where the implementation date is unknown. These include:

• 38 Building Act 198, which introduces civil liability for breaches of the Building Regulations 2010, with a limitation period of 15 years;
• mandatory new home warranties, which provide cover for 15 years; and
• the new construction products regulations.

From September 2026, it will be mandatory for all new buildings over 18m to have a second staircase. It is likely that this change will be embraced early by designers to ensure the property’s long term market value.

We await to see how the regulatory regime for higher-risk buildings and dutyholder regime under the building regulations will work in Scotland and Wales. A Building Safety (Wales) Bill is expected in 2025.

Further reform in this area is likely in the aftermath of the Grenfell Tower Phase Two Final Report, which was published in September 2024. The Report recommended a mandatory accreditation certification for fire risk assessors, a national construction regulator, personal undertakings to accompany Gateway 2 applications and a more purposeful definition of higher-risk buildings (to take into account the building’s use and the likely presence of vulnerable people in the event of an evacuation). It remains to be seen whether these proposals will come to fruition and the Government’s response to the Inquiry is expected in March 2025.

An immediate outcome was the Remediation Acceleration Plan (RAP) in December 2024, which aims to speed up the identification and remediation of unsafe cladding on residential buildings. The plan applies only to England and the government intends to provide an update on its progress in the summer of 2025.The RAP proposes that by the end of 2029, all buildings 18 metres or taller with unsafe cladding in a government-funded scheme will have been remediated, and every building 11 metres or taller with unsafe cladding will either have been remediated, have a date for completion or the landlords will be liable to "severe penalties", which could include imprisonment. To enable this process Developers who signed the developer remediation contract must make every effort to:

• assess all their buildings by the end of July 2025,
• start or complete remedial works on 80% of their buildings by the end of July 2026;
• start or complete remedial work on all their buildings by the end of July 2027; and
• conclude cost negotiations with social housing providers by the end of July 2025.

The RAP also proposes:

• new legislation to ensure that defects are remedied within certain timescales and to help determine the beneficial ownership of buildings that are 11 metres or more in height;
• a new "joint plan" to which developers are invited to sign up, containing a range of commitments relating to remediation work;
• promises of funding and other resources to ensure adequate enforcement and the continuation of measures such as the Waking Watch Replacement Fund; and
• bringing into force the Building Safety Levy by Autumn 2025.

In order to financially assist local authorities and fire and rescue services to pursue landlords who are failing to undertake remedial works the Government has set up the Remediation Enforcement Support Fund. This allows funding of £5,000 to allow fire services and local authorities to procure independent advice on whether cases can be brought and up to £100,000 to obtain third-party expert services to pursue legal cases.

The RAP also confirms the government's intention to bring the Building Safety Levy into force in autumn 2025, which will raise £3.4 billion over at least ten years to pay for the remediation of building safety defects. The levy will be charged on all new residential buildings in England that require building control approval.

It is expected that in 2025 that there will be more court guidance on BSA applications for remediation orders and remediation contribution orders in the First-tier Tribunal (FTT) and information orders and building liability orders in the Technology and Construction Court (TCC). A working group made up of barristers, solicitors and members of the judiciary consulted during 2024, with the aim of providing consistency in approach to building safety issues across the TCC and FTT. These new protocols may be set out in updates to the BSA, the Civil Procedure Rules and/or the TCC Guide.

Payment

From 1 March 2025, large companies operating in the construction industry will have to report on retention sums withheld from suppliers under The Reporting on Payment Practices and Performance (Amendment) No. 2 Regulations 2024. These regulations apply to companies or LLPs which meet two of the following requirements: turnover of more than £36 million, a balance sheet total of more than £18 million or has more than 250 employees. The regulations affect contracts that relate to the carrying out of construction operations (within the meaning of the Housing Grants Construction and Regeneration Act 1996. This will apply to financial years beginning on or after 1 April 2025. Companies that fail to report this information will face sanctions. In addition, there are new requirements to report on the value of invoices paid late and disputed invoices. This information is recorded via an online portal at Companies House. It is a criminal offence by the business and every director/member if the business fails to publish the necessary information within the specified filing period and punishable by a fine.

There are two new Procurement Policy Notes dealing with companies bidding for government contracts worth £5 million which applies to contracts procured under the Procurement Act 2023. PPN 015 comes into force on 24 February 2025, where suppliers must demonstrate that they are paying 95% of invoices within 60 days (or 90%) with an action plan) and are also paying all their invoices within an average of 55 days. PPN 018 comes into effect from 1 October 2025 and reduces the payment average to 45 days (from 55 days). If suppliers cannot demonstrate these behaviours they will be deselected from government work.

In addition, there is a new Fair Payment Code (to replace the existing Prompt Payment Code), where businesses of any size can apply for a Gold, Silver or Bronze Award. This scheme awards best practice and drives improvements, but it is voluntarily for businesses to apply.

Construction products

Whilst it remains unclear when a new set of constructions product regulations will be published for the UK, there will be the following developments in 2025:

• the Construction Products Association is aiming to publish a new standard, BS 8670-2 Core Criteria for construction product competence, which has the support of the BSR, Office for Product Safety and Standards and the BSI.
• New regulation from the EU setting out the harmonised conditions for the marketing of construction products from the UK, replacing the existing EU Construction Products Regulation 2011. Also expected is the EU General Product Safety Regulation, which will affect supply chains from early 2025.

Standard Contracts

Whilst much of the new JCT suite was published in 2024, the Construction Management Contract and new Target Cost family of contracts is expected before Summer 2025. It remains to be seen how the principles in the JCT 2024 suite, which were previously Supplemental Provisions but are now in the main body of the JCT contract, regarding collaborative working and the obligation to notify and negotiate disputes will influences behaviours.

It is expected that FIDIC will introduce a climate change clause in 2025 (similar to NEC’s X29, which was published in 2022) to set objectives, obligations, incentives and damages according to a separate Schedule of Carbon Emissions. FIDIC also plans to introduce carbon management guidance for the lifecycle of the asset. FIDIC’s standard form contract for offshore wind projects was expected to be published in 2025, although it is now not likely to be published before 2026. It is not known when other contracts in the pipeline, such as an EPCM contract, joint venture agreement and PPP 2.0 Model Contract, will be available.

Conclusion

The next year poses ambitious plans for housing, infrastructure and building safety. Whilst these plans are supported by various Government initiatives, ranging from strategic planning and financial support, it remains to be seen if they will achieve significant results in these areas.