Construction

The construction industry faced significant challenges in 2025, with continued challenges in the forms of a skills shortage, price inflation and problems with meeting new homes targets (not least as a result of the challenges created by the Gateway regime introduced by the Building Safety Act 2022 (BSA)), along with a continued focus on fire safety claims.

Set against that was the continued growth of data centre work, and the opportunities – and challenges – created by the rise of AI. As we set out below, these themes are likely to continue in 2026, albeit evolving in largely positive ways.  

Artificial intelligence (AI)

AI adoption is accelerating beyond early adopter firms to become standard practice, fundamentally reshaping project delivery through predictive analytics, autonomous machinery and generative design tools. However, as AI systems become more sophisticated and integrated into core construction processes, stakeholders face complex legal, contractual and regulatory challenges.

In particular, a fundamental challenge remains regarding determining liability when an AI system makes a decision or recommendation that contributes to a defect, delay or safety incident – and this is something underwriters will need to interrogate their insureds about in terms of understanding the risk management of this. 

Data centres 

Elsewhere, demand for data centres continues to rise rapidly and the UK government’s National Data Strategy predicts data usage will double by 2026, driven in large part by the rise in AI but also cloud-based computing (as a data centre markets, the UK is third globally, behind the USA and, by a handful of datacentres only, Germany). 

However, whilst favourable changes to the National Planning Policy Framework and the move to designate data centres as nationally significant infrastructure projects should help ease the planning process, the data centre development boom is not without its legal challenges: 

• Data centres are complex construction projects, and huge sums of money are at stake not just in the construction of them but also throughout their operation, with the result that even minor delays or periods of downtime can result in cost overruns into the millions.

• Rapid changes in the technology used in data centres means obsolescence is a real issue facing the industry where older facilities become old and outdated before their time, and sometimes in the space of the construction period itself, which can lead to employers instructing multiple scope changes during the course of a project, or seeking to omit works, suspend them or even terminate the engagement of contractors where project demands and requirements have shifted during the construction phase. We therefore expect to see more employers structuring construction across multiple phases.

Fire safety: New builds 

From a fire safety perspective, the Gateway regime has to date caused significant delays to Higher Risk Building (HRB) projects (in 2025, turnaround times for Gateway 2 reached approximately 33 weeks for remediation works, with the result that some projects in England fell 12 to 18 months behind schedule), and those delays remain a concern for many in the industry. 

However, the good news is that recent reports suggest that applications are starting to turn around within the prescribed 12-week period, and following consultation with The Construction Leadership Council, the Building Safety Regulator is now accepting staged applications for new single tower HRBs at Gateway 2, which will ease matters further, as will the fact that just before Christmas the government released a Policy Paper confirming that the definition of HRB will not change in the immediate future. 

Further positive developments appear likely in 2026 and beyond, with the government having released a consultation document in December 2025 with a view to introducing a single construction regulator (as recommended by the Grenfell Phase 2 Report); and confirmed that it:

• Intends to commission an independent review of the building safety regulatory regime by April 2027.
• Is committed to bringing forward a Construction Products Reform White Paper by Spring 2026.
• Will publish an overarching strategy document for the built environment professions in Spring 2027.
• Will publish its first annual report in response to the Grenfell Phase 2 report in February 2026. Whilst as ever the detail of these documents will be crucial, the positive news is that a period of stasis is coming to an end. 

Fire safety: Claims 

From a claims perspective, we anticipate satellite litigation arising out of the Supreme Court’s 2025 decision in URS v BDW, most obviously with regard to what amounts to a ‘dwelling’ for the purposes of the Defective Premises Act 1972 (DPA, on the basis that limitation of liability clauses in construction contracts will not be effective to the extent that the works in question are caught by the DPA) and what losses can be recovered under the DPA (most obviously loss of profit). 

Further, with the Supreme Court having confirmed that developers can both owe a duty and be owed a duty under the DPA (most obviously where the developer who orders relevant work is the first owner), we anticipate main contractors may look to test whether they are in the same position. 

Finally, with the Court of Appeal having confirmed in Triathlon Homes LLP v Stratford Village Development Partnership that it will be difficult to resist applications for Remediation Contribution Orders (RCOs) (introduced by the BSA to make sure funding to fix building safety defects is made available or obtained to reimburse costs previously incurred in fixing building safety defects), we anticipate that the Courts in England and Wales will take a similar approach to Building Liability Orders (BLOs). However, it’s less clear how foreign courts will view such orders, which may well be important given that the headquarters of some companies who might be targeted in this regard are in foreign jurisdictions.