The last few years have been particularly tough for UK businesses. Inflation peaked at 11.1% ¹ in October 2022, pushing up costs and dampening consumer appetite; interest rates rocketed to 5.25%, making borrowing more expensive; and wage bills jumped, up 6% between January and March 2024 ², putting further pressure on already overstretched budgets.

There are some encouraging signs. Inflation fell to 2.3%, just above the Bank of England 2% target, in the 12 months to April 2024 ³ and interest rates have stabilised, with many expecting cuts later this year. But, although it appears the UK may be through the worst of the economic turmoil, trading conditions are still tough.

Insolvency rates remain high, with 2,177 company insolvencies registered in England and Wales in April 2024 ⁴. This is 18% higher than in March and in April the previous year.

Geopolitical issues are also plaguing business owners. Tensions in the Middle East, the China-Taiwan conflict and Russia’s invasion of Ukraine are disrupting supply chains and creating economic uncertainty. The US elections, and a potential change of President, could cause further tensions. 

Closer to home, Brexit remains a business bugbear, with the British Chambers of Commerce calling on the new government to cut red-tape and promote trade by improving the relationship with Europe ⁵.

With economic conditions still challenging, the risk of litigation increases as companies are more likely to be affected by late payments, employment disputes and suppliers unable to meet their obligations.

Tough times can also drive crime rates. The latest estimates from the Crime Survey for England and Wales show a 29% increase in computer misuse offences in 2023 ⁶ while the British Retail Consortium points to record levels of violence and abuse against retail workers, with more than 1,300 incidents a day in 2023 ⁷.

Given the difficulties caused by the backlog in the courts ⁸, having access to specialist legal advice, which is included on many commercial legal expenses insurance policies, is invaluable. This can help a business owner understand the correct procedures to follow, whether litigation is appropriate or if other routes could be taken.

In this article we address how these pressures are affecting property owners, the construction industry, and employers in general, along with the benefits of seeking legal advice to avoid costly litigation.

Property used to be a safe bet, with almost guaranteed increases in both rental returns and market values. But, with new regulations introduced every year, staying on top of the compliance requirements is getting tougher for landlords.

Although the Renters (Reform) Bill was shelved when the parliament was dissolved following the announcement of a general election, a change in government is unlikely to lessen the flow of legislation for landlords. The Bill, which aimed to raise standards in the private rental sector and deliver more rights to tenants, proposed several key measures including a ban on Section 21 ‘no fault’ evictions; longer notice periods for rent reviews; and a new registration scheme for landlords.

The scale of the project – it was first proposed back in 2019 – means landlords should still be prepared for similar legislation, especially as both Labour and the Conservatives support reform, including a ban on Section 21. The National Residential Landlords’ Association says the shelving of the bill will mean ‘crippling uncertainty’ for landlords and could lead to more deciding to ‘cut their losses and sell up’ ⁹.

Even without political upheaval, it’s not an easy time for landlords. As remote and hybrid working become the norm, prestige office blocks no longer hold the same cachet of years gone by and landlords are having to deal with more defaults and requests to suit flexible requirements. Empty high street shops are also a common sight across the UK, attracting rising levels of crime.

The residential market is also challenging. Although supply is under significant pressure, with Rightmove estimating that an additional 50,000 rental properties are needed to meet demand ¹², the financial squeeze means some tenants will struggle to pay rent.

Cannabis farms are another issue for landlords. Over six years, the Met Police found more than 1,000 cannabis farms across the capital ¹³ and forces across the UK also report illegal activity discovered following a raid or, in some cases, a house fire. 

Checks should also be made to ensure that tenants aren’t sub-letting. This can be more challenging for a large landlord, but the problem is reportedly increasing because of the rising cost of living. This practice is likely to invalidate the landlord’s insurance and it might also result in a property being run as a house in multiple occupation (HMO), which must be licensed. This in turn could result in the landlord being prosecuted for health and safety breaches and being fined. 

Whether it’s a disagreement over a contract, leading to unpaid invoices, a problem with a subcontractor or an argument over design errors, legal disputes are common in the construction sector. And, while a new government could boost infrastructure and housing projects, the sector is still feeling the strains of the past few years. 

Factors such as higher interest rates, increased costs of materials and labour, plus a decline in consumer confidence due to the cost-of-living crisis have hit the sector hard. Figures from the Insolvency Service ¹⁴ show the highest number of insolvencies were in the construction sector, with 4,274 businesses – equivalent to 12 a day – going under in the 12 months to March 2024. 

And few believe these numbers are about to improve. Auditing firm Mazars predicts that difficulties in the sector will continue through 2024/25 ¹⁵ as subcontracting means the fortunes of construction firms can often be interlinked. The failure of a small firm can delay a project as the contractor sources a replacement, while a large firm folding can mean contracts evaporate for the companies working on its projects.

The length of construction projects also mean that firms can come under significant financial pressure. A fixed price contract that was agreed three years ago will not have factored in increased costs for materials, labour and energy.

Although materials cost inflation may now be easing, with BCIS data showing that prices fell by 1% in the third quarter of 2023 ¹⁶, the data provider warns that labour is now the cost driver for the construction sector.

As well as keeping up with wage inflation, which was 6% in the first quarter of 2024 ¹⁷, the sector is experiencing chronic labour shortages. Brexit, an ageing workforce and more complex construction projects have left the sector needing more than 250,000 extra workers by 2028 ¹⁸.

Skills shortages can also increase the risk of accidents. Figures from the HSE show construction continues to have the highest number of fatalities, most often caused by falls from height ¹⁹. A less safe working environment can increase the risk of a construction firm being sued. 

Construction firms must also be aware of new legislation, often to improve building safety. Recent additions include the programme to remove dangerous cladding in the wake of the 2017 Grenfell Tower tragedy; new fire safety guidance; and the requirement to register any building over 18 metres or seven floors in height.

These requirements should make buildings safer but they will also boost accountability, especially with the risk of enforcement action or being charged with a criminal offence.

Business owners in the sector must also be ready for new challenges. A recent example are the problems with reinforced autoclaved aerated concrete, RAAC. This material, which has a lifespan of around 30 years, was used in the UK between the 1950s and 1990s in public building such as schools and hospitals.

This could drive legal action as Barclay explains: “The situation is still unfolding, but there will be construction firms and property owners who’ll urgently want to know what their responsibilities are. There’s a lot of work to be done in terms of the wider implications and the liabilities.”

With the economy still under pressure, a new government will be keen to find ways to boost productivity. This means that, as well as preparing for changes relating to their own industry sector, business leaders must be ready for new employment legislation.

Doing the right thing by employees is particularly important in today’s labour market. Unemployment is low – 4.3% for January to March 2024 ²⁰ – and 21% of businesses with more than 10 employees have reported worker shortages ²¹.

Employment law is swinging towards workers’ rights. Already this year, employers have had to implement several pieces of legislation that will benefit employees ²² including Employment Rights (Flexible Working) Act 2023, which gives workers the right to ask for flexible working arrangements from day one; Protection from Redundancy (Pregnancy and Family Leave) Act 2023, which extends protection to pregnant employees and those recently returned from maternity, adoption and shared parental leave; and Carer’s Leave Act 2023, which gives employees the right to up to a week of unpaid leave a year for caring responsibilities.

These rights could be further enhanced over the course of the next parliament. Pre-election pledges include an end to zero hour contracts and fire and rehire ²³ and the introduction of a right to neonatal care leave and pay ²⁴. Employers will need to keep on top of any changes or risk legal action and reputational damage.

Employers could also find themselves with new responsibilities around employee health and wellbeing. More than 2.5 million people are economically inactive because of long-term sickness ²⁵ and the Health Foundation recently called on the government, public services, and employers to address the rising levels of ill-health ²⁶.

Even without a formal requirement to do more, employees increasingly expect their employers to offer health and wellbeing support with the most generous packages including everything from fertility benefit through to mental health and menopause support. Failing to offer this support could make it more difficult for an organisation to attract and retain talent. 

Another key employee demand is flexible and hybrid working, with more and more people seeking out a more favourable work-life balance. This is not without its challenges for employers. 

The latest Cyber Security Breaches Survey ²⁷ found that half of UK businesses had experienced some form of breach or attack in the last 12 months, with the percentage increasing to 70% for medium-sized business. The average cost of an attack or breach was £10,830 for medium and large employers. Running regular training to ensure employees are aware of the risks is key to prevention.

Alongside concerns about the virtual world, employers also face more action around how they treat the environment. Environmental, social and governance (ESG) issues are increasingly on the agenda with the first cases being brought. High-profile examples include ClientEarth bringing a claim against Shell for failing to manage climate risks ²⁸ and the European Court of Human Rights ruling that Switzerland had violated human rights by climate inaction.