The construction sector has long been a cornerstone of economic growth and development. However, construction firms are now navigating an increasingly complex and challenging risk environment. Drawing on findings from Gallagher’s latest Business Risk Index – based on insights from 1,000 UK business leaders – Tracy Keep, Managing Director of Gallagher’s National Construction Practice Group, explores the challenges currently facing the construction sector and what organisations can do to strengthen resilience in an uncertain environment.

The research highlights the unique pressures reshaping today’s commercial landscape, with the high cost of materials emerging as the most pressing concern for construction firms, cited by 80% of respondents. From raw materials and stock to essential components, rising costs are placing immense strain on profitability. For construction companies operating on tight margins, these increases are particularly difficult to absorb, often forcing tough decisions around pricing, project timelines, and investment.

Following this is the high cost of operations, highlighted by 68% of respondents. Energy, rent, logistics, and other overheads are creating sustained financial pressures. For many construction firms, these operational challenges are not just short-term hurdles but ongoing issues that require careful management to maintain competitiveness.

Adding to these pressures is the impact of the cost-of-living crisis on customer spending, with 61% of respondents identifying reduced demand as a key concern. Whether driven by tighter budgets, delayed projects, or shifting priorities, this trend is prompting organisations to reassess their strategies and adapt to changing market conditions.

Overlaying these challenges is the burden of imposed costs, such as National Insurance increases, which 59% of respondents flagged as a significant issue. These additional financial commitments, often outside of a business’s control, can influence hiring decisions, investment plans, and overall growth ambitions.

Beyond these immediate cost and demand pressures, construction firms are also grappling with supply chain disruptions, including delays, shortages, and logistics failures. These challenges not only impact day-to-day operations but also influence long-term strategic decisions, from project planning to supplier relationships.

Taken together, these findings paint a picture of a sector balancing immediate financial pressures with longer-term strategic imperatives. For many construction firms, the challenge lies not just in identifying these risks but in understanding how they interact and what steps can be taken to manage them effectively.

“Taking a structured approach to risk is becoming increasingly important. It’s not just about protecting against what might go wrong, it’s about giving construction firms the confidence to move forward, even in uncertain conditions,” says Tracy.

This is where working with an experienced insurance broker can make a tangible difference. By helping construction firms assess their risk landscape holistically—from operational exposures and supply chain vulnerabilities to emerging risks—brokers can support more informed decision-making. With pressures coming from all directions, having a broader perspective can help construction firms not only respond to today’s challenges but prepare more confidently for the future.

To download Gallagher’s full 2026 Business Risk Index report, please visit: www.ajg.com/uk/business-risk-index-2026

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