The collapse of the UK’s sixth-biggest contractor, the Grenfell Inquiry phase two report and the change in government all had a massive impact on the industry this year – and will continue to do so in 2025
How will the construction industry remember 2024? Perhaps it will go down as the year the sector’s building safety record faced a reckoning, or the year an election brought about a much-needed change in direction. Or maybe 2024 will be forever tainted by the sector’s biggest business failure since Carillion.
As we enter 2025, one thing’s certain: the Construction News team are unlikely to run out of things to write about anytime soon. Here, we revisit the topics that got us talking this year.
Insolvencies
The UK’s sixth-biggest contractor entered 2024 under a cloud of speculation about its financial health and ended it with the worst rumours coming true. ISG’s collapse in September may not have come as a shock to many, but it was an outcome few hoped for. The fall of ISG sent a stark message that even the biggest contractors can be susceptible to the turmoil the sector has faced in the past few years.
[ISG] entered 2024 under a cloud of speculation about its financial health and ended it with the worst rumours coming true
Details have now emerged about the trail the firm left behind. ISG’s administrators, from EY-Parthenon, have told suppliers they will likely receive nothing of the £300m-plus they are collectively owed, a loss that
will leave a significant dent in the sector.
Going into 2025, the longer-term impacts are beginning to reveal themselves, as some of ISG’s suppliers issue warnings, or worse, call in administrators. The aftershocks will continue to reverberate well into next year and beyond.
ISG wasn’t the only casualty this year, though. Logistics high-flyer Readie, stalwart housebuilder Stewart Milne and contractor-developer Osborne also hit the buffers in 2024.
Along with the unholy trinity of Covid, inflation and labour shortages, other explanations emerged for business failures. In an email to staff, Readie management said the firm’s woes had been compounded by “chronic tightening” in the performance bond and trade credit market.
Meanwhile, Osborne blamed Liz Truss’ disastrous mini-budget for scuppering one of its key ventures, and 143-year-old cladding contractor M Price said a claim for historic defective work under post-Grenfell laws tipped it over the edge. Other reasons were more mundane: modular specialist ModPods, for instance, said its cashflow had taken a critical hit from the prolonged process of moving its trading site.
There is some consolation: 68 fewer construction companies went under in the first three quarters of 2024 than in the first three quarters of 2023. The death toll of 236 firms for the first 10 months of this year is still depressingly high. But there is real hope that next year may not be as bloody, as surviving firms flush out the Covid shock and benefit from easing inflation.
Building safety
This year, as with all years since 2017, building safety took up a fair share of the headlines. Several key moments in the post-Grenfell transition were marked in 2024, not always without incident.
The first wobble came in February, when it emerged that large numbers of building control inspectors had not registered with a new statutory certification scheme, meaning that they would not be able to continue working from April.
The report recommended a shake-up of the construction industry far greater than the one already underway
After a month of holding firm, the government relented to industry pressure and moved the certification deadline by three months. It was sufficient to avert disaster, but not enough to stop around 500 inspectors from leaving the industry.
Questions also arose about whether the fledgling Building Safety Regulator (BSR) had the capacity to take on the mammoth task of overseeing the riskiest buildings, as contractors reported excessively lengthy waits for permission to start work on taller schemes.
The BSR hit back at the claims, arguing that it would be much more efficient at assessing projects if contractors and developers provided the right detail in their applications.
Then, in September, the Grenfell Tower Inquiry published its long-delayed final verdict. The 1,700-page report contained harsh lessons for the whole industry, not least contractors. Both Rydon, the contractor that led the refurbishment of Grenfell Tower, and subcontractor Harley Facades faced criticism for failing to meet the standards of a “reasonably competent” contractor.
The report recommended a far greater shake-up of the construction industry than the one already underway.
Among its suggestions were an overarching construction regulator, licensing for contractors working on higher-risk buildings and the reintroduction of a chief construction adviser within government.
Next year will probably bring more clarity on how far the inquiry recommendations will be integrated into the new system.
The report is not the final word on the Grenfell Tower tragedy, given the ongoing police investigation. However, the Metropolitan Police said in May it would probably take until 2026 for any criminal charges to be brought. With further waits for potential trials and sentencing, Grenfell’s bereaved and survivors are unlikely to see justice for some time.
Cladding remediation chugged along, albeit slowly. A parliamentary committee announced in November it would investigate the effectiveness of government cladding remediation schemes. At around the same time, the National Audit Office warned it might take more than 10 years to strip all buildings of flammable material.
A week before the final Grenfell Inquiry report, a fire at Dagenham building that was having its dangerous cladding removed was a timely reminder of how far there is still to go.
Data centres
Amid all the gloom, avid watchers of company filings may have noticed a shiny cuboid beacon. Many will remember 2024 as the year of the data centre, as the mainstreaming of generative artificial intelligence (through interfaces such as ChatGPT) kicked demand for digital infrastructure into orbit.
Many contractors are already feeling the glow, including Winvic, Skanska Rashleigh Weatherfoil and Gratte, which all wrote in their latest accounts that data centres had boosted their fortunes over the past year.
In September, the government announced it would class data centres as ‘critical national infrastructure’
The trend is only set to grow. Corporate giants Amazon, Google and Blackstone announced multibillion-pound investments in data centres in the latter half of the year, encouraged by a government that has talked up digital infrastructure as key to its vision of economic growth.
New planning protections have also been offered up in support of this vision. In September, the government announced it would class data centres as ‘critical national infrastructure’, affording them the same security protections as energy and defence infrastructure. The government is also due to respond to public feedback on a consultation proposing that data centres be considered Nationally Significant Infrastructure Projects, which would allow them to bypass local planning requirements.
…and the rest is politics
A general election – due to be called by the end of 2024 – was anticipated by many at the start of the year. But few expected the announcement to be so early – or so rain-soaked.
To no one’s surprise, Labour won by a landslide, marking the first change of government in 14 years. The industry reacted with cautious optimism: after years of U-turns and ministerial churn, might there finally be some kind of stability?
Soon after taking power, chancellor Rachel Reeves put several major projects on ice
Five months on, the verdict is mixed. Few can fault the government’s ambition: it has pledged to build 1.5 million homes in five years, bolstered by several new towns, and to shake up training with a new skills quango.
However, many doubt whether these promises can be delivered. Soon after taking power, chancellor Rachel Reeves put several major projects on ice, such as the A303 Stonehenge tunnel and A27 Arundel bypass, and announced further reviews into the affordability of the existing transport and healthcare pipeline. Furthermore, and perhaps surprisingly for a party that pledged to “get Britain building”, construction did not rank among the government’s 10 priority sectors in its industrial strategy.
The October budget brought boosts and blows in equal measure. On one hand, billions of pounds of planned investment in building prisons, hospitals, housing, carbon capture and green hydrogen schemes won praise from the chief executives of Balfour Beatty and Wates. Reeves also confirmed that the HS2 high-speed rail line would run to Euston station, with an initial injection of public money to start tunnelling from Old Oak Common. But she stopped short of committing funds to the actual station. Details about a private financing model remain as murky as when the idea was first mooted in 2023 by the then prime minister Rishi Sunak.
Some industry figures raised concerns about whether the construction sector, already struggling with labour shortages, has the capacity to take on these new projects. According to Construction Industry Training Board chief Tim Balcon, the government’s housebuilding plans alone will require 152,000 additional workers. Meanwhile, National Federation of Builders chief executive Richard Beresford argued that another budget measure, a 1.2 per cent rise in employers’ National Insurance contributions from next April, would hinder efforts to take on and train new staff.
Again, more clarity will come in 2025. Labour has promised a 10-year infrastructure strategy alongside its multi-year spending review, both due in spring. Reviews into the feasibility of government transport and hospital projects are also likely to conclude soon.
