Unstable geopolitics, increasing regulation and contractor risk aversion - the effect on delivery of construction projects

How regulatory change, procurement pressure and shifting risk are reshaping construction project delivery as the sector gathers at UKREiiF.

As the industry gathers in Leeds for UKREiiF, much of the conversation will rightly focus on ambition: regeneration, investment and delivery at scale. But behind that ambition sits a construction sector operating in one of the most complex and risk‑laden environments it has faced for a generation.

From a legal and delivery perspective, the challenge is no longer simply about getting projects off the ground. It is about navigating an unprecedented combination of regulatory change, shifting risk appetite and fragile market conditions – all while clients are under pressure to move at pace.

The Geopolitical Environment

Recent shifts in geopolitics and the uncertainties that have followed are now materially affecting the ability of UK contracting authorities to deliver development projects.  The impact on the UK economy, trade and security of non-domestic disputes, supply‑chain disruptions, energy market volatility, and wider global tensions can no longer be ignored.  These factors are driving significant increases in the cost of key construction materials, labour, and energy, undermining budget certainty and leading to delays or re-scoping of schemes, but that’s not all.  The unusually challenging and volatile political environment in the UK is contributing to the difficulties in delivering development projects, including in relation to policy changes, funding and regulation, all of which is affecting market confidence.

Whilst, on the one hand, inflationary pressures have reduced contractor appetite for fixed‑price risk, resulting in fewer bidders, higher tender prices, and in some cases failed procurements.  It also results in lower investment and higher borrowing costs for the Government.  These issues have heightened funding gaps, increased reliance on contingency allowances, and required authorities to adopt more flexible procurement and contract management strategies, such as risk-sharing mechanisms, indexation, and phased delivery, in order to maintain project viability.

A step-change in construction regulation

The volume and impact of legislative change affecting construction over the past few years has been substantial. In England, the Building Safety Act 2022 and the Procurement Act 2023 have fundamentally reshaped how projects are procured, governed and delivered. In Wales, the Social Partnership and Public Procurement (Wales) Act 2023 has added another layer, introducing new statutory obligations and, most recently, mandatory model contract clauses for public sector construction projects over £2 million.

These changes are not incremental. They have introduced entirely new roles, new compliance gateways and new responsibilities across the supply chain – which clients and contractors are still finding their way through. For local authorities and other public bodies in particular, keeping pace with this evolving legal framework while continuing to deliver projects has become a significant challenge.

A growing part of our role is therefore educational: helping clients understand what the law now requires, how procurement processes need to adapt, and how contracts should be structured to reflect the latest regulatory expectations from the outset.

Public and private sector complexity

These pressures are not confined to one part of the market. In the public sector, clients must balance compliance, social value obligations and delivery timescales against a challenging funding and risk landscape. In the private sector, projects may involve complex funding structures, regeneration models or public‑private partnerships, each bringing their own contractual and commercial considerations.

PPP/MIM projects are harder to structure, finance, and bring to market.  With debt finance now more expensive for investors and project companies they are less willing to take long-term risk and higher risk premiums mean facing the prospect of affordability gaps.

We are seeing this particularly in areas such as healthcare, education and sport‑led regeneration, where projects extend well beyond traditional buildings to encompass wider infrastructure, community facilities and long‑term partnerships with local authorities. These schemes require alignment of commercial objectives, public benefit and delivery risk.

Procurement under pressure

Clients are continuing to pursue projects at speed, often through established frameworks and call‑off arrangements. But even within those frameworks, procurement and contract negotiation have become more complex.

Contractors are understandably more cautious about the allocation of risk. The market context – rising costs, tighter margins and uncertainty around programmes – means that contractors are less willing to accept blanket risk transfer. As a result, we are seeing more extensive negotiations around standard terms, greater scrutiny of employer risk, and increasing resistance to provisions that would previously have been accepted with limited debate.

This shift has cost implications. Risk that is not accepted by the contractor is often priced back into the project or retained by the employer, pushing costs up and adding pressure to already constrained budgets.

Delivery risk in a fragile market

Once projects move into delivery, that heightened risk profile does not disappear – it often becomes more acute.

Contractors operating in a high‑risk, low‑margin environment are more likely to pursue claims for time and money under their contracts. Notices are being served more frequently, claims are more detailed, and disputes are becoming more contentious. While many issues are still resolved through negotiation, adjudication is increasingly part of the landscape.

At the same time, the risk of contractor insolvency is a cause for concern. This not only creates challenges for live projects, but also affects competition at procurement stage, as clients find a reduced pool of contractors willing or able to take on certain forms of risk.

Collaboration now matters more than ever

If there is a single lesson emerging from the current environment, it is that collaboration matters more than ever.

Early engagement – whether that is with contractors, funders or advisers – can make a material difference to project outcomes. Clearer risk allocation, realistic procurement strategies and well‑understood contractual mechanisms help to reduce disputes and provide greater delivery certainty.

Legal advice has a critical role to play here, not simply in documenting risk, but in helping clients understand how to operate within an increasingly complex framework while still achieving delivery.

What this means as the sector heads to UKREiiF

UKREiiF is increasingly a forum not just for ambition, but for honesty about delivery. Construction remains the engine through which regeneration and investment ambitions are realised, but it is operating in a far more regulated, risk‑sensitive and contested environment.

Clients who succeed over the coming years will be those who recognise that reality early: setting up projects carefully, engaging meaningfully with risk and seeking clarity at every stage of procurement and delivery. In a market like this, understanding the legal landscape is not a box‑ticking exercise – it is a core part of making projects happen.

We have the expertise and experience to provide support by structuring procurement strategies and contracts that are both robust and flexible—allocating risk realistically, accommodating market uncertainty, and preserving value for money. That includes advising on appropriate pricing mechanisms, managing inflation and programme risk, and ensuring compliance with the latest procurement and building safety regimes. We can also help drive better outcomes through early engagement with the market, clear documentation, and effective contract administration frameworks.

Our role is to help to anticipate issues before they arise, maintain delivery momentum, and provide mechanisms to deliver projects on time, on budget, and with reduced exposure to disputes.