10.02.25

Construction Industry Trends to Watch in 2025

Construction Industry Trends in 2025

The construction industry has faced significant volatility and uncertainty in recent years due to challenges such as material procurement difficulties, project delays, high interest rates, and inflation. These factors have shaped recent construction industry trends, with new work output contracting since mid-2023, according to the Building Cost Information Service (BCIS). However, the latest BCIS forecast indicates a more optimistic outlook, predicting growth in 2025. Specifically, new work output is expected to rise by 21% over the forecast period, spanning from the fourth quarter of 2024 to the fourth quarter of 2029.

Despite this optimism, construction businesses should monitor several key industry trends that could hamper the industry this year, including skilled labour shortages, regulatory compliance and technological advancements. Monitoring the latest sector developments and appropriately adjusting operations and risk management practices to respond to these shifts is crucial, as each has significant impacts on the success and public perception of a business.

This article details the construction industry trends to watch in 2025.

Labour Shortages

Labour shortages have been an issue across sectors for the past few years, and the construction industry is no exception. According to a report by Kingfisher, the owners of B&Q and Screwfix, the sector could have a shortfall of 250,000 tradespeople by 2030. If labour shortages persist, construction businesses may resort to hiring a larger number of new or inexperienced employees. However, without proper safety education and skills training, these workers may contribute to increased construction site accident and injury rates. Along with impacting employee health and well-being, these incidents can raise insurance claim frequency, extend project delays and compound operational expenses.

Small and medium-sized enterprise (SME) housebuilders may step in to plug the labour gap in 2025; the government recently extended a funding package for SMEs as part of its ambitious target to deliver 1.5 million new homes. Regardless, construction businesses of all sizes should take steps to combat labour shortages this coming year and beyond. Measures may include increasing outreach efforts at community events (e.g. high school job fairs) to encourage the next generation of construction workers; leveraging upskilling and reskilling initiatives to continue educating current workers; providing comprehensive and ongoing safety training to new and existing workers; and attempting to bring employees who recently left the industry back to work through various incentives (e.g. flexible employment arrangements and career advancement opportunities).

It may also benefit construction companies to explore underrepresented demographics to increase their talent pools, hire recruitment agencies to expand their searches, and recruit workers with construction-ready skills from closely related sectors such as manufacturing and mining. Building and maintaining a positive company culture can also help businesses attract and retain employees.

Increased Sustainability Efforts

Consumers and regulators have been placing additional pressure on construction businesses to ensure eco-friendly and sustainable practices. In particular, the UK government has established a target of achieving net-zero carbon emissions by 2050. The construction industry is expected to play a significant role in the attainment of this goal, not least because residential and commercial buildings are responsible for 25% of the UK’s greenhouse gas emissions, according to the Environmental Audit Committee.

The construction industry has already taken steps to improve efficiency and sustainability. For example, engineered timber is rapidly gaining recognition as a solution to standard wood and traditional brick and block building methods, and modular construction—where parts of a building are constructed off-site—can minimise waste while maximising build speed. Businesses may continue to look for strategies to increase sustainability and decrease emissions in 2025, including electrifying fleets and machinery, using green energy sources (e.g. wind and solar) and streamlining operations through cutting-edge technologies.

Technological Advancements

Construction businesses of all sizes have utilised advanced technology—such as 3D printing, robotics, wearable safety sensors, GPS, drones and the internet of things—to help automate certain construction tasks; improve efficiency, productivity and safety; and reduce waste and expenses.

Another innovation construction businesses have been utilising is Building Information Modelling software, which helps optimise designs and efficiently manage products. This technology can help improve communication, planning and predictability, and its capabilities will be enhanced as 3D printing and virtual and augmented reality technologies continue to improve.

Generative artificial intelligence (AI) also has several applications within the construction industry. Generative AI is a type of AI that uses data inputs and creates new content, such as text, images and audio, based on that information. It can be used to generate optimal plans, design more efficient buildings and enhance risk management programmes through automated quality assurance. This technology can also help businesses swiftly respond to client requests and questions.

Despite these benefits, it’s important to note that technology use can also lead to elevated cyber exposure. In fact, construction businesses are among the most likely to fall victim to cyber-facilitated fraud, according to a government report.  

Considering this information, it’s imperative for construction businesses that leverage technology to review their digital exposures and adjust (e.g. providing enhanced employee education and training on common cyber-threats and installing updated security software) as needed to mitigate possible cyber-incidents. These companies should also consider securing dedicated cyber-insurance for essential coverage from potential incidents and related losses.

Building Safety

Businesses involved in the construction of high-rise buildings will continue to feel the impact of the Building Safety Act 2022 as they get to grips with the specifics of the legislation for new and upcoming projects. The legislation, which came into force in 2023, introduced new requirements for how high-rise building constructors must manage structural safety and fire risks through the entire building process, from design to occupancy. Moreover, the Grenfell Tower Inquiry published the second stage of its findings on 4th September 2024. The government has not yet responded to the final Grenfell report, but further building safety changes are anticipated.

Overall, construction companies must scrutinise regulatory compliance to reduce their exposures in 2025, especially those involved in high-rise building construction. Moreover, the government could expand the Building Safety Act to include all building types in the future, so staying abreast of legislative changes is essential for all construction businesses. 

Conclusion

Several trends are impacting the construction sector. By tracking these developments and mitigating any associated exposures, construction businesses can effectively position themselves to maintain long-term growth and operational success.

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Information provided by Zywave and contributed by Harrison Law, (Cert CII) Head of Commercial & Private Clients, Cox Mahon Ltd.

The content of this article is of general interest and is not intended to apply to specific circumstances. It does not purport to be a comprehensive analysis of all matters relevant to its subject matter. The content should not, therefore, be regarded as constituting legal advice and not be relied upon as such. In relation to any particular problem which they may have, readers are advised to seek specific advice. Further, the law may have changed since first publication and the reader is cautioned accordingly. © 2025 Zywave, Inc. All rights reserved.