The construction industry has always operated in an environment of uncertainty. Rising material costs, labour shortages, evolving legislation and market volatility mean that every project carries a degree of risk. However, an increasing number of clients, contractors and consultants are asking the same question: is the industry becoming more risk averse?
Current market conditions suggest the answer is yes.
Contractor insolvencies remain at historically high levels, economic uncertainty continues to influence investment decisions, and regulatory requirements are becoming increasingly complex. In 2024 alone, more than 4,000 construction firms became insolvent in England and Wales, with construction accounting for the highest number of insolvencies of any UK sector.
Against this backdrop, organisations across both the public and private sectors are adopting more cautious approaches to procurement, commercial management and project investment. While careful planning is essential, excessive risk aversion can slow project delivery, increase costs and limit opportunities for innovation and growth.
Why is risk aversion increasing in the construction industry?
Several factors have contributed to a noticeable shift in attitudes towards risk across the UK construction sector.
Economic uncertainty
Despite some signs of stabilisation, construction businesses continue to operate in challenging economic conditions. Inflationary pressures, finance costs, geopolitical uncertainty and fluctuating demand have made cost planning and forecasting more difficult.
Recent industry analysis suggests that many clients and funders are delaying investment decisions until market conditions become clearer, contributing to slower project starts and reduced confidence across parts of the industry.
As a result, developers and clients are placing greater emphasis on budget certainty, detailed cost planning and robust financial forecasting before committing to new schemes.
Contractor insolvencies
The collapse of major contractors and the ongoing failure of smaller firms have reinforced concerns around supply chain resilience.
Construction continues to record the highest number of insolvencies of any UK industry sector, with approximately 4,032 construction company insolvencies recorded during 2024. While this represented a slight improvement on 2023 levels, insolvencies remained significantly higher than pre-pandemic figures.
These challenges have encouraged clients to carry out more detailed due diligence on contractor financial stability and place greater emphasis on risk assessments during procurement.
Increased accountability
Both public and private sector organisations face increasing scrutiny around project expenditure, value for money and delivery outcomes.
Whether managing public funds or private investment, decision-makers are expected to demonstrate that risks have been properly identified, assessed and mitigated. This has led to greater reliance on independent cost advice, detailed risk analysis and robust commercial governance.
Regulatory changes
The introduction of the Building Safety Act and wider changes to building safety regulations have significantly increased compliance responsibilities across the industry.
Clients, developers and contractors are now expected to demonstrate greater accountability throughout a project’s lifecycle, increasing the importance of early-stage planning, risk identification and effective project controls.
How construction risk management is changing procurement
One of the clearest indications of increasing risk aversion can be seen in procurement strategies.
Today’s clients are placing greater emphasis on contractor experience, financial resilience and proven delivery capability rather than focusing solely on achieving the lowest tender price.
Pre-qualification processes have become more rigorous, tender evaluations more comprehensive and procurement decisions more heavily influenced by risk management considerations.
There is also growing recognition that transferring excessive risk to contractors is rarely an effective solution. Unbalanced contract conditions often result in higher tender prices, reduced competition, increased disputes and greater delivery risk.
As a result, many organisations are exploring procurement approaches such as:
- Two-stage tendering
- Early Contractor Involvement (ECI)
- Framework agreements
- Collaborative procurement models
These approaches allow risks to be identified and managed earlier, improving cost certainty and helping projects progress more efficiently.
Effective construction procurement should achieve the right balance between protecting client interests and maintaining a healthy, competitive marketplace.
Managing risk rather than avoiding it
There is an important distinction between avoiding risk and managing it effectively.
Successful projects rely on informed decision-making supported by realistic budgeting, robust cost management and proactive commercial advice.
Delaying investment decisions or introducing overly cautious procurement strategies may appear to reduce risk in the short term. However, postponing projects can expose organisations to further inflation, changing market conditions and lost opportunities.
Effective construction risk management focuses on:
- Identifying risks early
- Assessing potential impacts
- Allocating risk fairly
- Implementing practical mitigation measures
- Monitoring risk throughout the project lifecycle
The objective is not to eliminate risk entirely, but to understand it and make confident, evidence-based decisions.
The importance of professional quantity surveying
Professional quantity surveyors play a critical role in helping clients manage financial and commercial risk throughout a project’s lifecycle.
Services such as cost planning, estimating, value engineering, procurement advice and commercial management provide clients with the information required to make informed investment decisions.
Independent quantity surveying advice helps organisations:
- Improve budget certainty
- Manage construction costs effectively
- Develop appropriate procurement strategies
- Identify commercial risks early
- Achieve better value for money
In a market where uncertainty remains a constant challenge, access to reliable cost and commercial expertise can significantly reduce risk exposure and improve project outcomes.
Looking ahead
The construction industry will continue to face economic pressures, skills shortages, sustainability challenges and evolving regulatory requirements in the years ahead.
At the same time, recent industry surveys indicate that client confidence remains fragile, with many organisations delaying project starts and adopting a more cautious approach to investment decisions.
This makes effective construction risk management more important than ever.
Organisations that can balance prudence with opportunity, combining robust commercial management with informed decision-making, will be best placed to deliver successful projects despite ongoing uncertainty.
The challenge for the industry is not whether to take risks, but how to assess, allocate and manage them intelligently.
Risk can never be eliminated from construction, but it can be understood, managed and mitigated through effective planning, robust cost control and experienced commercial advice.
At CQS Solutions, we provide professional quantity surveying, construction cost management and commercial consultancy services that help clients manage risk with confidence.
Through accurate cost advice, robust procurement support and practical commercial guidance, we help organisations achieve greater certainty and stronger financial outcomes from project inception through to completion.
Get in touch with us today to find out how we can help you on your next project.