Construction project owner looking at clipboard

Why cladding is unsafe and who will be left to foot the bill

Almost five years on from the horror of the Grenfell Tower disaster, the row over who will pay to replace unsafe cladding on buildings across the UK rages on - but, in the meantime, it is estimated that around half a million people are currently living in buildings with unsafe cladding.1

So what has happened, what is the latest, and what might happen next? Let’s take a look.

Why is cladding unsafe?

As most people know by now, the crisis has its roots in the Grenfell Tower fire that resulted in the deaths of 72 residents after cladding affixed to the building exterior allowed fire to spread rapidly.

Cladding is essentially thin panelling that is attached to the exterior of a building in order to improve insulation, weather resistance or the building aesthetics – and it is important to note that not all types are considered unsafe. Unfortunately, those that have been assessed as posing heightened fire risk are also among the most common – including the Aluminium Composite Material (ACM) panels used on the Grenfell Tower.2

ACM cladding is made from plastic sandwiched between two very thin sheets of aluminium, which is now known to be a highly flammable mix. Crucially, however, in the case of Grenfell, air gaps between the cladding and the main building fed the cladding fire, sending it up the side of the building at a ‘terrifying rate’ – by-passing internal fire breaks and overwhelming attempts to keep the fire under control.3

The birth of the cladding crisis

The enquiries that followed Grenfell drew some stark conclusions – these cladding types did not meet UK fire safety standards, were installed on hundreds of high-rise and public buildings across the UK, and would need to be replaced.4

However, by June 2020 the sheer scale of that task was becoming clear – a great many properties could be affected, with more than 11,000 at risk high rise buildings already identified.The knock-on effects for home-owners in affected properties were disastrous, with mortgage lenders and insurers losing confidence in fire safety standards – leaving the properties more expensive to insure and impossible to sell.6

Then in February 2021, the UK government pledged around £5bn to help with remediation costs, though the fund was limited to buildings of over 18m in height which in turn left many facing crippling bills to remedy cladding fire safety issues themselves.7

That situation is, however, starting to change.

What’s the latest? Who foots the bill for unsafe cladding?

In January 2022, the government announced new measures designed to protect more leaseholders at affected properties from the cost of replacing unsafe cladding – putting the onus firmly on property developers instead.

Michael Gove, Secretary of State for Levelling Up, Housing and Communities, said: "I can confirm today to the House that no leaseholder living in a building above 11m will ever face any costs for fixing dangerous cladding, and working with members of both Houses we will pursue statutory protection for leaseholders and nothing will be off the table."8

Those words were backed by a demand that developers previously involved in building properties with unsafe cladding should agree a fully funded plan of action including remediating unsafe cladding on 11-18 metre buildings, currently estimated to be £4bn.9

In essence, that means developers are expected to pay for remediation work, not leaseholders – Gove gave a guarantee that no leaseholder living in high or medium-rise flats will “pay a penny to fix dangerous cladding”.5

Meanwhile, developers refusing to comply could face sanctions including restricting access to government funding and future procurements, the use of planning powers and the pursuit of those companies through the courts.10

While the process of working with developers to find a way forward is ongoing, it does seem that leaseholders in properties over 11m tall will be protected, with developers footing the bill. But the situation remains uncertain for those in buildings under 11m.

In fact, to date those in buildings of 11m and under are simply not covered by the latest government efforts to resolve the crisis.11  Many are now facing costs running to tens of thousands to address fire safety issues, as well as rising insurance premiums and an inability to sell those properties.

However, given the trend so far has been to extend developer responsibility to more properties – from those over 18m to those over 11m – leaseholders in those properties will hope that further help is on the way.

For developers, on the other hand, a further extension to buildings below 11m would bring further costs – on top of the £4bn the industry has already been tasked to provide. That would clearly negatively impact their financial health, but could also put further pressure on other costs – including insurance premiums that have, in some case, risen tenfold already.

Help is at hand

Whatever happens next, it seems certain that both leaseholders and developers will be watching closely and hoping for the best. In the meantime, both leaseholders and developers may have sustained inflated insurance premiums and potentially restricted insurance cover for their respected risks. Should you be concerned about your risk profile, our construction projects insurance experts and real estate insurance experts are here to help.

Read the latest government guidance in full here.














Real-world insight that we don't share anywhere else

Get access to exclusive help, advice and support, delivered straight to your inbox.

Craig Johnson, Real Estate Leader, Manchester

Craig Johnson has a wealth of experience supporting asset managers, developers, institutional funds, managing agents and property owners on their real estate and development insurance needs. Advising on real estate risks of all types from buildings insurance, to restrictive covenants and rights of light exposures.