The UK
construction industry has gone into the second half of 2025 at a pivotal moment for the sector. With new government investment, tighter safety legislation, domestic supply shifts and rising financial stress across the entire industry, contractors are navigating both opportunity and serious exposure.
As the landscape shifts, all changes carry direct insurance implications, and failing to adapt could leave many firms underinsured or unnecessarily exposed.
So, whether you’re a main contractor, subcontractor or property developer, understanding how these developments affect your risks - and insurance needs - could make the difference between ending the year smoothy or facing a bumpy, costly road.
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The Government’s £39 billion housing commitment
The
June 2025 Spending Review announced a
£39 billion housing investment to deliver 1.5 million new homes over the next decade. This has been welcomed across the industry and is set to drive a surge in
public-private partnerships and regional development.
As contractors’ workloads increase, as a result, so does the complexity of projects, which will demand corresponding insurance programmes that are far broader and more responsive.
It’s vital that contract works cover is kept up to date with the increase in both contract values and those longer build durations. Similarly, professional indemnity insurance needs to reflect the extra design responsibility and the number of subcontractors involved.
Firms engaged in large-scale projects or joint ventures should also review their
directors' and officers’ (D&O) insurance. With the public spotlight on housing delivery, there’s increased scrutiny on board decisions, making regulatory investigation, shareholder actions or alleged mismanagement more likely.
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Building safety reform & a new cladding levy
Scotland’s introduction of a
Building Safety Levy in June 2025, and similar proposals in England, signal a shift in
how remediation costs will be funded going forward. Developers and principal contractors are likely to bear much of this cost, either directly or indirectly.
Contractors working on mid or high-rise buildings must account for these levy costs during bidding and budgeting stages. But beyond the financials, there are legal and reputational exposures to consider. Failure to comply with Building Safety Act requirements could result in claims against directors personally -especially where cladding issues resurface, or a remediation scheme falls short.
D&O insurance becomes essential here. It should include cover for regulatory defence, legal costs and claims of inadequate remediation or unsafe practice. Latent defects insurance should also be considered to protect against future structural issues once the building is handed over.
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Domestic material supply & supply chain shifts
Etex’s £170–200 million plasterboard facility in Bristol,
now fully operational, is reshaping domestic supply chains by reducing both reliance on imports and transport delays. Many contractors are pivoting to UK suppliers to improve project timelines and sustainability scores.
While this offers resilience, it creates new exposures. Contractors entering long-term supply agreements may be financially exposed if a supplier goes bust or can’t meet demand. Trade credit insurance is an effective tool here, protecting your business against non-payment or supplier failure.
Subcontractor default is another rising risk. Whether due to insolvency, poor workmanship or contract abandonment, this can leave the main contractor liable. Contractors need to make sure they review public liability and contract works policies to ensure subcontractor liability is properly covered. And vicarious liability should also be addressed in your employers’ liability insurance.
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Rising credit stress & contractor insolvencies
The first half of 2025 has seen over 45,000 UK businesses classified as in ‘
critical financial distress’, with construction one of the hardest-hit sectors due to tight margins, payment delays and fixed-price pressures.
With insolvencies on the rise, protecting against client default is key. Trade credit insurance offers a lifeline, ensuring unpaid invoices can be recovered or indemnified. For those bidding on public infrastructure or housing projects, securing surety bonds (such as performance, advance payment and retention bonds) is no longer optional; it’s expected.
Insolvency also increases D&O exposures. Directors may face claims from creditors, investors or administrators for breach of fiduciary duty. Strong management liability coverage, including legal defence and insolvency run-off, is proving to be even more essential for directors and senior decision-makers.
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Surety market adjustments & bonding capacity
With greater reliance on surety over bank guarantees, demand continues to climb, but
reinsurers are tightening pricing and capacity in light of loss activity.
Contractors seeking large contracts must be proactive. This means forecasting future bond needs early, maintaining clean and well-presented financials, and working closely with a broker who can negotiate multi-line bond facilities. A robust bond programme will strengthen credibility with clients and may improve cashflow by reducing retention requirements.
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New & emerging risks worth covering
As construction becomes more digital, regulated and legally complex, here are some additional coverages that contractors should now be considering:
- Cyber liability – for protection against ransomware, system failures and third-party data loss from cloud-based project platforms.
- Contractual penalties or delay in start-up (DSU) – to recover lost revenue from project delays due to insured events.
- Plant & equipment cover – for theft, damage and breakdown of owned or hired-in equipment on site or in transit.
- Contractors' pollution liability – particularly important for brownfield or environmentally sensitive sites.
- Non-negligent liability insurance – to protect against claims from third parties affected by construction activities, even when no fault is proven.
- Personal accident cover – for directors or key workers whose absence could stall progress or client relationships.
- Latent defects insurance (LDI) – for long-term protection against hidden structural issues, often a requirement for funders or future buyers.
What you should do now
If you’re a construction business, now is the time to take a more strategic look at your insurance programme. This year’s changes - from legislation and insolvency risk to large-scale public funding - mean your old cover may no longer be fit for purpose as we move into the second half of the year.
At Ascend, we work with construction firms across Essex and the UK to deliver tailored, proactive risk solutions that go beyond the basics. From complex surety facilities to enhanced D&O and credit insurance, we’re here to support your growth with confidence.
