Construction industry updates – financial impact and opportunities
Construction firms continue to face rising costs, skills shortages and pressure on profit margins. Several recent and forthcoming rule changes will add to those demands.
Yet change can also create opportunities. New environmental standards, public procurement rules and investment in low-carbon buildings could generate work for businesses that prepare early.
Here are the main developments you need to know about.
The new Building Safety Levy
The Building Safety Levy comes into force in England on 1 October 2026. It will help fund work to correct safety defects in residential buildings.
The levy will apply to certain developments that provide at least 10 new homes or 30 bedspaces in purpose-built student accommodation. It will cover qualifying building control applications submitted on or after 1 October 2026.
The government will calculate the charge using the amount of eligible floorspace and a rate set for each local authority area. Qualifying developments on previously developed land, often called brownfield land, will receive a 50% lower rate. Affordable housing and several other types of accommodation are exempt.
What could it mean for your finances?
If you’re planning residential development, you’ll need to include the levy in -
· land valuations
· development appraisals
· funding needs
· cash-flow forecasts
· selling prices
· contract negotiations
You’ll need to pay any levy due before the first completion notice or occupation of the building, whichever comes first. Failing to budget for it could delay completion or place further pressure on your cash flow.
The lower rate for brownfield developments may also affect which sites offer the best return.
Changes to the Construction Industry Scheme
New Construction Industry Scheme rules took effect on 6 April 2026.
If you haven’t paid any subcontractors during a month, you must now submit a nil CIS return. You won’t need to file one if you’ve already told HMRC that you don’t expect to make any subcontractor payments during that period.
Payments made to local authorities and certain public bodies no longer fall within CIS.
What could it mean for your finances?
A month without subcontractor payments no longer means you have nothing to do. Missing the return could result in a late-filing penalty.
You should check that your accounting systems and monthly processes reflect the new requirement. It’s also worth confirming who deals with nil returns when the person who usually handles payroll or CIS is away.
Good CIS records will help you:
· avoid penalties
· spot incorrect deductions
· keep subcontractor records up to date
· reconcile payments more quickly
· protect your cash flow
Future Homes and Buildings Standards
The government published the final Future Homes and Buildings Standards in March 2026. Most of the new requirements will take effect in England on 24 March 2027, with later arrangements for higher-risk buildings.
New homes and non-domestic buildings will need high levels of energy efficiency and low-carbon heating. New residential buildings will also face requirements covering on-site renewable electricity generation.
Gas boilers won’t meet the performance standard for new homes. The government expects most new homes to include solar panels, while heat pumps and heat networks will play a larger role.
What could it mean for your finances?
The immediate effect will often be higher design and construction costs. Developers and contractors may need to allow for:
· heat pumps and other low-carbon heating systems
· solar panels
· improved insulation
· better ventilation
· new design and energy assessments
· staff training
· specialist subcontractors
· changes to supply chains
The government’s impact assessment forecasts significant extra costs for businesses, mainly through installation, maintenance and replacement costs.
If your work will continue beyond the transition period, review the rules early. A design that meets today’s standards may need changes before work starts.
Where’s the opportunity?
Demand should grow for businesses that provide:
· renewable energy systems
· heat pump installation
· insulation
· energy-efficient ventilation
· building energy assessments
· low-carbon design
· monitoring and maintenance
Training staff and building links with specialist suppliers could place your business in a stronger position when clients start asking for these services.
A new carbon tax on imported materials
The UK Carbon Border Adjustment Mechanism takes effect on 1 January 2027.
It will place a carbon price on certain imported goods from industries including aluminium, cement, iron and steel. These materials play a major role throughout construction.
Businesses that import £50,000 or more of covered goods over a 12-month period may need to register, keep records and pay the new tax. Businesses that buy from UK importers could also face price rises as suppliers pass on some or all of the extra cost.
What could it mean for your finances?
Review your supply chain and find out whether you buy covered products directly or through another business.
You may need to consider:
· possible increases in material costs
· new record-keeping duties
· the carbon data available from suppliers
· whether fixed-price quotes leave enough room for cost changes
· alternative suppliers or materials
· extra contingency in project budgets
Don’t assume that changing supplier will always save money. Compare the full cost, lead times, product quality and contract terms before you make a decision.
Where’s the opportunity?
The new tax may make lower-carbon materials and some UK-produced goods more competitive. Businesses that can show how they reduce the carbon impact of a project may also gain an edge when bidding for work.
Digital waste tracking
The government is introducing mandatory digital waste tracking across the UK in stages.
Licensed and permitted waste-receiving sites in England and Wales must use the new service from 1 October 2026. Scotland and Northern Ireland follow in January 2027. Waste collectors, carriers, brokers and dealers are due to join from October 2027.
During the first stage, affected sites must record each load of controlled waste within two working days.
What could it mean for your finances?
Not every construction business will come within the first stage. However, the wider scheme will affect more of the construction waste chain over time.
Affected firms may need to pay for:
· compatible software
· staff training
· changes to site processes
· extra administration
· support from waste contractors
Better information could also help you find where waste costs arise. You may identify materials that you could reuse, recycle or order in smaller amounts.
More opportunities in public sector work
The Procurement Act came into force in February 2025 and changed how many public contracts work in England, Wales and Northern Ireland.
The new system aims to make public procurement simpler and give smaller businesses better access to contracts. Public contracts and qualifying subcontracts also include 30-day payment terms, helping payments move more quickly through the supply chain.
For smaller construction firms, this could open access to work that once seemed difficult to find or bid for.
You’ll still need to prepare carefully. Before bidding, check that you can:
· meet the contract requirements
· provide the requested financial information
· show a sound payment record
· manage the effect on working capital
· deal with reporting and compliance duties
· deliver the work without placing existing projects at risk
A large contract can increase turnover while placing severe pressure on cash flow. Forecast the timing of wages, materials, subcontractor payments and customer receipts before you commit.
Further construction product rules could follow
The government published its Construction Products Reform White Paper in February 2026. It proposes stronger rules covering product safety, testing, certification, information and enforcement.
These proposals aren’t settled law yet, so businesses shouldn’t treat them as current requirements. However, manufacturers, importers, suppliers and contractors should follow their progress. (www.gov.uk)
Stronger product records and quality controls may add cost. They could also help reputable firms show clients that they use safe, suitable and properly tested materials.
What should construction businesses do now?
You don’t need to wait until every rule applies. Start by working out which changes affect your business, your projects and the areas in which you work.
Useful steps include -
· updating project budgets and cash-flow forecasts
· checking CIS reporting processes
· reviewing contracts and quotation terms
· speaking to suppliers about material prices and carbon data
· checking whether planned developments face the Building Safety Levy
· identifying any training or equipment you’ll need
· exploring suitable public sector contracts
· tracking proposed construction product rules
Allow for both the direct cost of compliance and the time your team will spend managing it.
Key takeaways for the construction sector
Several recent changes could affect construction costs, administration and cash flow.
The Building Safety Levy creates an immediate planning need for residential developers in England. CIS changes increase the need for reliable monthly reporting. Low-carbon building standards and the new carbon tax could raise costs, while also creating demand for new skills and services.
Businesses that review the figures early will find it easier to price work, protect margins and choose which opportunities to pursue.
Planning for construction industry change?
Liondaris & Co will help you assess how new rules could affect your costs, cash flow and tax position. We’ll also help you strengthen your forecasts, review your CIS processes and plan investment in your business.
Speak to us before you commit to a major project, contract or purchase. Early advice could help you avoid unexpected costs and make better use of the opportunities ahead.
This article provides general information and doesn’t replace financial, tax or legal advice based on your circumstances.
Contact Liondaris & Co