What is on the horizon for the Construction and Infrastructure Sector in 2025?
As we usher in the new year, many in the construction industry will be bracing themselves for the introduction of the building safety levy, the anticipated landmark building safety cases and other legislative changes.
The Arbitration Bill is set to bolster London's status as a premier hub for international arbitration and payment practices are also under the spotlight, with new regulations aiming to improve transparency and fairness in retention clauses, for the benefit of SMEs.
The Procurement Act 2023 is poised to unify and simplify the procurement landscape, while the Water (Special Measures) Bill will look to quell growing disquiet over the UK’s polluted waters. Lastly, the Planning and Infrastructure Bill, together with the establishment of the National Infrastructure and Service Transformation Authority, promises to catalyse infrastructure delivery, driving growth and innovation.
These legislative advancements and judicial decisions herald a year of opportunity, accountability, and enhanced safety for the construction industry, setting the stage for a period of robust growth and ethical practice.
Michael O’Connor, Partner in our Construction, Engineering and Projects team comments “The Building Safety Act 2022 is already making waves, with pivotal cases such as URS Corporation Ltd v BDW Trading Ltd and Triathlon Homes LLP v Stratford Village Development Partnership poised to test the extended 30-year limitation period and the application of Remediation Contribution Orders, respectively, potentially reshaping the accountability framework within the industry.”
This insight considers the key legal developments which may impact the construction and infrastructure sector during 2025.
Building Safety
One of the headline issues for developers in 2025 is the building safety levy which is intended to recompense the Building Safety Fund for the costs / future costs of remediating building safety defects in England. In early December 2024, the Government announced its intention to bring into effect the building safety levy in Autumn 2025, to be charged on all new eligible residential buildings in England. Having completed two public consultations in 2023 and 2024, what isn’t entirely clear at this stage is how the levy will be implemented but it is intended to raise around £3.4 billion over the next 10 years.
In early December 2024, the Government announced its Remediation Acceleration Plan to ramp up the pressure on the sector to progress remediation works, including:
- an intention to introduce new legal obligations on landlords to remediate unsafe cladding, with ‘severe penalties, including criminal and civil sanctions’ for inaction;
- granting of further powers and resources to regulators so that bad actors are held to account;
- from April 2025, an increase to funding for social landlords applying for Government remediation funding so that remedial works can start sooner;
- an announcement promised for Spring 2025 on a long-term strategy for social housing remediation; and
- a joint plan that commits developers for the first time to stretch targets to assess all of their buildings by July 2025, to start or complete remedial works on 80% of their buildings by July 2026, and on all their “unsafe” buildings by July 2027.
The broadening of liabilities in association with building safety legislation continues to be a major risk area for the construction industry.
Among many other changes, the Building Safety Act 2022 (BSA) created Remediation Contribution Orders (RCOs) and Building Liability Orders (BLOs). RCOs and BLOs have the potential to lift the corporate veil of companies to allow associates to be pursued for the cost of rectifying defects causing building safety risks.
The BSA also extended the limitation period during which claims can be commenced to 30 years, retrospectively, for claims concerning dwellings under the Defective Premises Act 1972 (DPA). For adjudicators, it looks like the floodgates will open this year following the landmark decision handed down late last year in BDW Trading Limited v Ardmore Construction Limited [2024] EWHC 3235 (TCC), in which it was found that the adjudicator had jurisdiction over a tortious claim under the DPA notwithstanding that it had long since been outside of the limitation period under the contract but had been brought back within limitation through the 30-year extension. It remains to be seen whether an adjudicator’s decision will be viewed as sufficient evidence of the existence of a relevant liability or relevant defects (as applicable) to allow BLOs or RCOs to be directly applied for.
Significant decisions related to these changes are expected in 2025:
URS Corporation Ltd v BDW Trading Ltd1
This case has gained considerable attention, with parts of the BSA being tested in Court including how the retrospective effect of the 30-year limitation period for claims under the DPA should be applied. The Supreme Court heard the appeal in early December 2024, with the decision most likely published in early 2025.
Triathlon Homes LLP v Stratford Village Development Partnership (1) Get Living Plc (2) and East Village Management Limited (3)2
This was the first major case on when it would be just and equitable for RCOs to be awarded and resulted in the First-Tier Tribunal (Property Chamber) awarding RCOs against both the original developer, Stratford Village Development Partnership (originally publicly owned through the Olympic Delivery Authority), and also its parent company, Get Living Plc, notwithstanding that the parent company was not in existence at the time of the Olympic village being built. The decision is being appealed and is listed in front of the Court of Appeal on 19 March 2025.
Willmott Dixon Construction Limited v Prater and others
The proceedings are expected to generate one of the first key decisions on when it is just and equitable for the Court to grant a BLO for the benefit of one of the co-defendants against other co-defendants.
BDW Trading Limited v Midgard Limited (1) JRL Group Limited (2) and JRL Group Holdings Limited (3)
This is another cladding case going before the Courts and expected to provide judicial interpretation on when a BLO should be granted. BDW was the original owner and developer of a property in Slough, appointing Midgard to complete the design and construction of the building. BDW has alleged that Midgard breached building regulations, the standards required by NHBC and its duties owed under the DPA in respect to cladding and is seeking substantial damages from Midgard together with a BLO from two group companies.
Building Safety (Wales) Bill
In England, much of the secondary legislation required to give effect to the provisions of the BSA has now been published. In Wales, the position is less advanced, with the Welsh Government scheduling the Bill for introduction in 2025, but with the benefit of sight of the recommendations made in the Grenfell Tower Inquiry’s Phase 2 Report. The consultation on the reforms, dealing with dutyholder roles, gateways, golden thread information, mandatory occurrence reporting and compliance and stop notices, is scheduled for Spring 2025, with the intention to introduce the Bill before the summer recess 2025. Some divergences are already being seen in the approach being taken by the Welsh and English Governments; notably including the fact that higher risk buildings need only contain one dwelling to be classified as such in Wales; whereas they must include two dwellings in England.
Building Regulations
Fire safety related changes to the Building Regulations 2010 and Approved Document B (ADB) are due to take effect on 2 March 2025:
- ADB has been amended to extend the provision of sprinklers to all new care homes in England irrespective of height with effect from 2 March 2025, subject to transitional provisions. This change will not apply to building work which is the subject of a building control application with plans, a building notice or initial notice issued before that date where the works have sufficiently progressed within 6 months of that date.
- References to BS 476 for reaction to fire and roofs have been removed from ADB. Previously operating a dual system for reaction to fire and roofs and fire resistance testing and classification for construction products, including both the National Classes (BS 476) and the European Standard (BS EN 13501 series), BS EN has been deemed to be more current and robust than BS 476 as the route of specification within ADB for reaction to fire and roofs classifications.
Architect's Code
The Architect’s Registration Board has published a consultation on a new draft Architect’s Code, intended to be published in early 2025. The Code is founded on six standards: honesty and integrity, public interest, competence, professional practice, communication and collaboration and respect. The Code is said to enshrine the key principles of professionalism, such as recognising the boundaries of one’s level of competence, and the paramount importance of safety underscored by the Grenfell Tower Inquiry’s phase 2 report published in Autumn 2024.
The Arbitration Bill
Reintroduced in 2024 following the General Election, this Bill is expected to be passed in 2025. It implements the Law Commission’s previous recommendations to support London as a leading seat for international arbitration.
Notable changes include the ability for the Tribunal to make decisions on a summary basis (as the courts may do) so that claims or issues without a real prospect of success or of being defended do not need to proceed to full trial. Among other things, the Bill also establishes the law of the arbitration agreement where this has not been stated in the contract, with it being the law of the seat of the arbitration; a more logical choice than the law of the contract.
Payment Practices and Retentions
The draft Reporting on Payment Practices and Performance (Amendment)(No2) Regulations 2024 are intended to come into force on 1 March 2025. As part of the requirement for the UK’s larger companies and limited liability partnerships (LLPs) to report twice in a financial year on their payment practices, these Regulations introduce additional requirements on a qualifying company or LLP to publish certain information about their payment practices and policies with respect to retention clauses in any construction contract they have with their suppliers.
This includes statements about the company’s/LLP’s standard practices for applying retentions and whether a standard percentage rate is applied, duly disclosing that percentage.
They are intended to apply to companies and LLPs which exceed two or all of the thresholds for qualifying as a medium-sized company under the Companies Act 2006 (as modified for LLPs) on their last two balance sheet dates with financial years beginning on or after 1 April 2025. Targeting retention practices is one of the measures being implemented by the Government intended to support cashflow for small businesses, alongside considering a range of further policy measures intended to help address poor payment practices experienced by SMEs.
Construction Industry Scheme
From 1 March 2025, HMRC is changing its policy to include the provision of traffic management services within the Construction Industry Scheme (CIS), a scheme whereby ‘contractors’ deduct money at source from payments otherwise due to their subcontractors, passing on the payment direct to HMRC. This change will apply only when such services are supplied to a contractor carrying out construction operations. Some other preparatory works (tree and vegetation removal, temporary white lining or road repairs carried out before permanent works) will also be treated as within the scope of the CIS.
Procurement Act 2023
Originally due to be implemented on 28 October 2024, its implementation has been delayed to 24 February 2025. The Act amalgamates the separate procurement regimes under the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016, the Concession Contracts Regulations 2016 and the Defence and Security Public Contracts Regulations 2011. The new public procurement regime will apply to England, Wales and Northern Ireland.
Water (Special Measures) Bill
With increasing scrutiny of the water industry, the Water (Special Measures) Bill was published following its introduction to Parliament on 4 September 2024. It is intended to create a new framework to hold water companies and executives accountable for governance and remuneration.
This intervention sits alongside the launch of an Independent Commission into the water sector and its regulation in October 2024, due to report back later in 2025.
Planning and Infrastructure
The National Infrastructure Commission’s Report published in October 2024, highlighted the impact of Government and its importance as a strategic enabler, as part of identifying barriers to the delivery of major infrastructure projects in the UK.
This coincided with the delivery of the Autumn Budget, announcing the Government’s intention to publish a 10 year national infrastructure strategy in Spring 2025 alongside the introduction of the Planning and Infrastructure Bill to Parliament in the current 2024-2025 session.
It also intends to establish the National Infrastructure and Service Transformation Authority (NISTA) (combining the functions of the National Infrastructure Commission and the Infrastructure and Projects Authority) to drive more effective delivery of infrastructure across the country. NISTA will have an enhanced role in supporting major projects, including validating business cases prior to HM Treasury funding approval.
Turning to the Planning and Infrastructure Bill, it aims to streamline the planning process by introducing a national scheme of delegation to standardise which decisions are decided by committee and which are delegated to officers. In addition, there are proposals to introduce mandatory training for planning committee members and smaller, targeted committees for strategic development. As part of the Bill, the Government is seeking to introduce a more strategic approach for developers meeting environmental obligations and contributing to nature recovery. The Government hopes that a strategic approach will allow for development to be unlocked in areas where issues such as nutrient neutrality are acting as a barrier to development.
Although the legislation mandating that developments (subject to some exceptions) provide at least 10% biodiversity net gain (BNG) came into force in February 2024, analysis indicated that for planning applications submitted between April and June only 0.5% of applications included a promise to deliver this level of BNG. It is anticipated that, in 2025, the proportion of developments meeting the statutory requirement will be significantly higher, potentially adding significant cost to development proposals. The target date for BNG becoming mandatory for Nationally Significant Infrastructure Projects (NSIPs) is November 2025. Further consultation on the application of BNG to NSIPs is awaited but given the typical scale of NSIPs, many of which cross multiple local authority areas, the application of BNG to such development is likely to be particularly complex.
So, overall, we are looking ahead to a year of opportunity, accountability, and enhanced safety for the industry.
Please contact your usual Charles Russell Speechlys contact, if you have any queries.
1 [2023] EWCA Civ 772
2 [2024] UKFTT 26 (PC)