2025 UK construction trends
Industry report
Key trends that are reshaping the future of the UK construction market, and impacting construction insurance risks
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Despite exceeding expectations with encouraging levels of activity in recent years, the UK construction sector has arguably faced its toughest period yet during a turbulent 2024. New build output across residential, commercial and industrial settings have been stifled by weak economic growth, high interest rates and labour cost inflation which has impacted short-term growth.
But after a difficult start to the year, there is light at the end of the tunnel for an industry which has once again demonstrated its resilience by adapting to profound challenges.
Commercial construction activity continues to show signs of positivity with residential work also gaining momentum, supported by lower borrowing costs and the new Labour government’s ambitious housing targets. It is hoped that the outcome of the general election will also provide much-needed clarity for the pipeline of public sector construction projects which have been blighted by uncertainty and delays.
Whilst growth expectations remain cautiously optimistic for the months ahead, UK construction appears to have turned a corner as we head into 2025. This report will consider the key trends that are influencing the market’s prospects and impacting construction insurance risks, from the small tool theft epidemic to the technologies leading the sector’s digital transformation to deliver vital productivity gains.
Skills shortages driving soaring tender costs
The construction industry’s shortage of skilled workers will continue to be the catalyst for wage inflation and a rise in tender prices, creating ongoing financial challenges for contractors and threatening the viability and affordability of future projects. The Building Cost Information Service (BCIS) forecasts that as cost inflation eases and market activity revives, tender prices are anticipated to rise faster than building costs next year, and by 20% and 15% respectively over the next five years.1
Encouragingly, UK construction's new project orders grew by 16.5% in the second quarter of 2024 which suggests a positive indication of future activity. However, analysts warn that ongoing skills shortages may limit future output and lead to upward pressures on wages to meet increased demand, undermining project efficiency and leading to delays through reduced productivity.2
The skills gap has created a candidate-driven market that has made skilled labour significantly more expensive, further compounding the challenges contractors face on top of fluctuating materials costs and supply chain pressures. This is reflected in the rocketing wages commanded by workers with “green skills", where costs for insulation specialists and solar and heat pump installers in London have increased by 22% in the past 12 months.3
Construction wages increases4
Tips
- Construction firms should review their insurance cover to determine whether they are suitably covered for the implications of unforeseen events.
- Price escalation clauses help contractors manage these risks by allowing for adjustments in costs due to unforeseen circumstances.
- Continually scour the supply chain, and review partners as much as suppliers to control costs and ensure relationships remain collaborative and productive.
Small tool theft is continuing to rise
Small tool theft has been a longstanding challenge in the construction industry and is set to intensify as the UK battles against inflation and other economic pressures.
The total value of small tools stolen has risen to £98m annually, marking a 5% increase from the previous year. Such is the extent of the tool theft epidemic, UK police forces data has revealed that 44,514 items were stolen in 2023, with at least one tool theft reported every 12 minutes.5
Small tools are particularly vulnerable to being stolen as they are often seen as easy targets. London accounted for over half (54%) of all recorded thefts, but when assessing the impact based on the size of a local population, Cleveland police recorded more tool thefts per resident in comparison to London.
In a notable shift, 55% of all tool thefts occurred from vehicles, totalling 24,543 incidents, highlighting a 14% rise in the last 12 months. Over half of tool thefts from vans occurred at night, with thefts most commonly occurring while the vehicle was parked at the tradesperson’s home or in a car park.
The theft of small tools and equipment from construction sites and vehicles can impact the smooth running of projects, with increased costs, project delays and damage often ensuing. Theft trends remain seasonal, typically peaking in the winter months after the nights draw in and the clocks go back in October. This is highlighted by tool theft from vans being 53% higher in October in contrast to April after the clocks have gone forward.
The increased frequency of tool thefts is having a significant financial impact on the construction sector. In addition to the cost implications of replacing items and increased insurance premiums, 83% of contractors say they have lost business as a direct result of theft and and not having their tools readily available, costing on average £1,836 in lost work.6
Tips
- The seasonal nature of tool theft suggests that contractors should review their preventative measures and exercise additional vigilance and consider additional security precautions heading into the Autumn months
- The increased financial impact of tool theft is likely to drive demand towards more comprehensive insurance coverage tailored to the needs of construction tradespeople. Insurance brokers can help their customers to review their policies to determine if they are covered for the cost of replacing or repairing tools if they are lost, damaged or stolen.
HSB's plant and equipment loss prevention insights
Increased investment in security technologies
As the impact of theft rises, the construction industry is poised to invest more in advanced security technologies to protect tools and equipment, as well as increasing the likelihood of recovery if they are stolen. According to research, 94% of tradespeople are taking extra precautions, spending on average £626 on security measures including remote tracking technologies, alarms, additional locks and drill plates.7
Advanced tracking technologies, such as Bluetooth-based or RFID devices such as the technology included in the CESAR security system, can help contractors to track and trace missing tools using a mobile device’s GPS signal. CESAR is the official marking and registration scheme owned by the Construction Equipment Association who works closely with specialist Police units - the Agricultural and Construction Equipment (ACE) and the National Construction and Agricultural Theft Team (NCATT).
Despite soaring theft statistics, NCATT's most recent figures show an encouraging increase in the recovery of stolen assets, evidenced by a total value of recoveries for the year standing at £6,212,875 compared to £2,303,000 in the preceding 12-month period.8
More construction contractors are likely to purchase tools equipped with advanced digital protection through manufacturer apps. Modern apps are QR code enabled to help track their location and simplify the registration process, as well notifying agents if a stolen tool is brought in for service. Advanced remote disabling technology can also be used to disable tools; making them unusable and helping to deter theft.
Tips
- To prevent loss or damage, ensure tools are safely stored in sufficient lockable tool chests and steel storage containers which are difficult to break into.
- To aid recovery in the event of tools being stolen, tools should be marked with unique identifiers (e.g. permanent corporate colours with distinctive livery markings, together with combinations of letters and numbers using permanent markers/ultraviolet pens).
- Compile a complete list of tools containing essential information such as model number, serial number, date code and purchase receipt, which is required for police reports and vital for processing insurance claims.
BIM leading construction's digital transformation
The UK construction industry has been gradually embracing technology driven by a heightened need to improve efficiency, meet evolving safety standards and focus on sustainability. In a global survey of construction professionals, 97% expect to see increased digital investment at their companies by 2026.9
However, UK construction workers were amongst the lowest percentage of respondents who expect their companies to increase investment in technology across the following categories:
Energy efficiency and renewable energy
Building Information Modelling
Construction management software and platforms
Virtual reality and augmented reality
3D printing
Artificial Intelligence
Over a quarter (26%) of UK construction employees cited that implementation costs are the leading barrier to the introduction of new technologies – the highest in a survey of over 1,300 industry workers across 15 countries. In contrast, at 27%, UK construction workers only trailed fellow professionals from Austria (36%) and the Czech Republic (28%) in their optimism that the level of difficulty involved in adopting new technologies would be "easy" or "very easy".
One technological movement that is gathering momentum is BIM, which is transforming the way construction projects are planned, designed and managed. BIM offers a digital representation of the physical and functional characteristics of a building or infrastructure that can be used in the design, construction and operation of buildings and infrastructure.
73% of UK construction processes now use BIM
BIM processes are delivering tangible efficiencies through reduced project design and construction costs, in addition to savings if BIM is extended into the building management and operation stages. Other benefits of BIM include improved collaboration between construction contractors, reduced errors, and enhanced project visualisation.
While smaller construction firms may struggle to justify the significant level of investment required based on current client demand, adoption of BIM amongst larger contractors in the UK is likely to become more widespread due to the continued pressure to adopt more efficient and sustainable construction practices.
Tips
- Greater investment in modern technologies can help construction businesses to proactively manage risks, leading to fewer incidents and claims.
- Insurance brokers can help their customers to determine whether they need specialist coverage to manage construction-related risks associated with sustainable initiatives.
MMC key to meeting ambitious housing targets
Modern Methods of Construction (MMC) are expected to play a pivotal role in meeting the UK’s ambitious housing targets, and are the catalyst for the construction industry embracing sustainability and becoming more efficient.
Modular construction is an innovative approach which involves fabricating building components in a factory before assembling them on-site, reducing project timelines by 20% to 50% due to fewer delays caused by poor weather conditions and human error. However, off-site prefabricated manufacturing facilities require substantial upfront costs and a constant throughput of work to provide a return on investment. Despite sluggish take-up for several years, the UK modular construction market currently has a turnover of £14 billion and is growing at 6.3% annually.11
Embracing faster, smarter and more sustainable MMC methods is likely to be fundamental to meeting the Labour government’s bold plans to build 1.5 million homes by the end of this parliament, which equates to 50% more houses being built than the previous Conservative government managed to achieve. The Affordable Housing Bill also mandates that 40% of residential projects on state land must use MMC, and a minimum of 20% of council homes.
It's not just the private housing sector that is expected to ramp up its investment in MMC. In the public sector, both the NHS and schools are turning to modular construction to increase patient capacity and provide specialist facilities for pupils with special educational needs.
Public sector modular building projects
provision for children and young adults in an adaptable modular building. The £2.9 million project involves transporting 29 modules from a manufacturing site to the school’s location in Barrow. (12)
education space during a major rebuild and refurbishment of its existing school
building. The 6,500m2 rental accommodation spans the equivalent of 26 tennis courts, comprising 186 modules. (14)
Conclusion
2024 has been a tough year for the construction industry with output in the private housing and repair, maintenance and improvement sectors being hit particularly hard. But following a period of uncertainty caused by economic challenges and a changing political landscape, confidence is slowly returning. The Construction Product Association’s construction autumn forecast predicts a rise in UK construction output of 2.5% in 2025, followed by another 3.8% in 2026.15
However, it remains to be seen whether Labour’s Autumn Budget will dampen this positive momentum after it was met with a mixed response from the construction industry. The hike in National Insurance costs from 13.8% to 15%, combined with a 6.7% rise in the national minimum wage from April 2025, will be problematic given construction’s skilled worker shortages and urgent need to attract fresh talent.
The impact of increased costs and higher taxes could also prove devastating for construction SMEs who already face considerable financial strains and the threat of insolvency, which is further exacerbated by small tool theft.
Although the challenges ahead remain considerable, UK construction appears to have renewed vigour as it prepares to embark on a transformative path by embracing evolving technologies to fulfil the government’s long-term plans to deliver new homes, improve infrastructure, and repair and maintain existing buildings.
Modern methods of construction, including prefabricated and modular systems, especially when coupled with BIM, can play pivotal roles in delivering the government’s Affordable Homes and School Rebuilding Programmes, in addition to its commitment to infrastructure delivery following increased investment.
In an industry often characterised by a boom-and-bust cycle, it is the most adaptable, and not necessarily the fittest, UK construction firms that will prosper by navigating these key trends and managing an evolving risk landscape.
