Risks Facing Large Construction Companies in 2025
If you own a large construction company, you might be concerned about inflation, labor shortages, and changing regulations. In some ways, the future looks bright for the construction industry in the U.S.—projections indicate an 8.5% growth in total U.S. construction starts. However, there are also some significant risks facing the industry.
Understanding these risks and how to mitigate them will help you and your company take advantage of this projected growth. Here are six risks you should be aware of in 2025—and strategies for navigating them to make your business successful.
1. Skilled Labor Shortage
A skilled labor shortage is one of the biggest issues impacting the entire construction industry—both large and small companies alike. In 2025, it’s estimated that one in four contractors will be over the age of 55. This means that 25% of the skilled construction workforce is expected to retire in the next decade.
According to the National Association of Home Builders, the construction industry will need to bring in more than 720,000 new skilled workers in 2025 to keep up with demand. The cost of labor continues to be a pressing issue, despite inflation rates cooling since their peak in 2022.
To mitigate this risk, experts recommend:
- Investing in apprenticeship programs to attract young talent
- Prioritizing jobsite safety to attract and retain talent
- Upskilling existing employees to increase the pool of skilled workers
2. Rising Material Costs and Scarcity
Supply chain disruptions and rising material costs have made it difficult for large construction companies to keep up with demand. While material costs are driven up by inflation and tariffs, many supply chain issues stem from global conflicts, cyberattacks, and extreme weather events, exacerbated by climate change.
Currently, the U.S. imports about 7% of all goods used in residential construction projects, including steel, aluminum, and lumber. Many of the products made in the U.S. also source components from other countries. Building material manufacturers and contractors are bracing for potentially higher costs due to uncertainty surrounding potential tariffs.
Additionally, there is increased demand for sustainable building materials like solar panels, recycled materials, energy-efficient windows, low-flow plumbing fixtures, sustainable flooring, insulation materials, green roof systems, eco-friendly paints and coatings, and smart building technologies. These fixtures can help homeowners save money in the long run, even if they cost more to build initially.
To mitigate this risk, experts recommend:
- Negotiating contracts that lock in material costs
- Building additional costs into contracts to account for potential price fluctuations
3. Evolving Regulatory Landscape
New and changing regulations are always a source of uncertainty in the construction industry. For instance, building codes may change in different states due to weather patterns, such as an increasing likelihood of flooding from hurricanes. Tragic structural failures the country has experienced in the past decade have also led policymakers to enact stricter safety regulations, which continue to evolve in various ways.
There are new regulations from OSHA regarding personal protective equipment (PPE) on job sites, effective January 13, 2025. These new standards require PPE to properly fit any construction worker who needs it. This includes hard hats, gloves, safety glasses, hearing protection, respirators, coveralls, vests, harnesses, and all other types of PPE. These regulations were enacted because improperly fitting PPE can put workers’ safety at risk.
To mitigate this risk, experts recommend:
- Staying informed about changing regulations
- Prioritizing safety on the job site
4. Operational Complexities
As a large construction company, your projects may be layered and complex, involving multiple contractors and subcontractors. This can create complicated legal challenges if not managed correctly. When undertaking large, complex projects with numerous contractors, you need to conduct a thorough legal review of all agreements to ensure liability is fairly distributed among all parties.
To mitigate this risk, experts recommend:
- Hiring an experienced construction attorney familiar with the laws of your local jurisdiction to review all your contracts
- Ensuring liability is fairly shared among all contractors and subcontractors
5. Safety and Workplace Injuries
Every year, about 169,600 non-fatal injuries and illnesses are reported in the construction industry. There has been a recent surge in judicial rulings against construction companies in cases of workplace accidents, faulty construction, environmental damage, and other safety concerns, with many companies being forced to pay damages exceeding $10 million.
This, in turn, is driving up insurance costs. Having a solid insurance plan for your construction company remains paramount in these times, so consult your independent insurance agent to ensure you’re getting the best deal for your money.
To mitigate this risk, experts recommend:
- Prioritizing proper job site oversight and training
- Conducting regular safety training and inspections
- Partnering with an insurer that offers dedicated loss control services
6. Cybersecurity threats and data breaches
Cybersecurity is a risk in just about every industry. More than 75% of construction, engineering, and infrastructure respondents in one recent survey reported experiencing cybersecurity incidents within the past 12 months.
Not only can cybersecurity breaches cost you a lot of money, but they can also damage your business’ reputation—causing you to lose business in the future.
To mitigate this risk, experts recommend:
- Asking your insurance agent about cybersecurity insurance, which is now offered by many insurers
- Protecting your business from the most common cybersecurity threats by backing up your data, installing antivirus software, and educating your employees
- Having a cyber attack plan in case of emergencies