July 1 Double Compliance Hit: Steel Tariffs AND Unfair Dismissal Rights Land Together for UK Construction

Two changes hit UK construction simultaneously on 1 July 2026: the government's new steel import tariffs — cutting quotas by 51% and imposing a 50% levy above those quotas — and the employment law trigger that gives every construction worker hired from today unfair dismissal rights within six months. Neither change arrived without warning. Both are now in force. Most construction SMBs are unprepared for either, let alone both at once.

This guide explains what each change means, how they interact, and the practical steps your business needs to take to protect itself.

The Steel Tariff: What Changed on 1 July 2026

The UK government confirmed the steel tariff regime on 25 June 2026. The key numbers:

• Quota reduction: 51% — the volume of steel that can be imported at the lower in-quota tariff rate has been cut by more than half
• Above-quota tariff: 50% — steel imported above the reduced quota is subject to a 50% levy
• Estimated cost impact: £75–£300 per tonne additional cost depending on steel type and supply chain
• Fabricated steel: not covered — structural steel sections, hollow sections, and finished fabricated products fall outside the tariff protection, meaning that work is at risk of being offshored

The British Constructional Steelwork Association (BCSA) has warned that the exclusion of fabricated steel puts up to 60,000 UK manufacturing and fabrication jobs at risk, as overseas competitors can now undercut domestic fabricators on finished product pricing.

For construction SMBs, the tariff lands on top of an already significant cost inflation picture. Arcadis's latest tender price index forecasts public sector construction costs rising 14.5–22% in total to 2029, with private sector commercial between 17–26%. Oil price volatility, the carbon border adjustment mechanism coming in from 2027, and now steel tariffs are driving a sustained upward cost trajectory. Projects that were priced on 2025 steel quotes may now be loss-making.

The Unfair Dismissal Trigger: What Changed on 1 July 2026

The Employment Rights Act 2025 introduced one of the most significant changes to employment law in a generation. The qualifying period for unfair dismissal has been reduced from two years to six months — but the trigger is hire-date dependent. The new six-month threshold only applies to workers hired on or after 1 July 2026.

In practice this means:

• Any construction worker your business hires from 1 July 2026 onwards can bring an unfair dismissal claim after six months in post
• Workers hired before 1 July 2026 retain the two-year qualifying period
• From January 2027, unfair dismissal compensation is uncapped — Section 124 of the Employment Rights Act 1996 (which set the compensatory cap at £115,115 or 52 weeks' pay) has been repealed under the ERA 2025. Tribunal awards will reflect actual financial loss with no statutory ceiling

For a construction business taking on site operatives, contract managers, groundworkers, or apprentices this summer, every single hire from today is a potential UD claimant by January 2027 — at uncapped award levels.

Why This Double-Hit Is Different for Construction

Most sectors face the UD trigger. But construction SMBs face it alongside a simultaneous labour cost and supply chain squeeze that makes dismissal decisions uniquely risky:

1. Project-based hiring patterns create UD exposure faster

Construction businesses routinely hire site staff for the duration of a project, then end contracts when the project completes or runs over. Under the old two-year rule, this was often legally low-risk — a project finishing within 18 months rarely triggered UD rights. From July 2026, any new hire working a six-month project now has UD rights before the project ends. End-of-project redundancies require a genuine redundancy situation, followed process, and documented evidence — or they face tribunal.

2. The Hinkley Point M&E Dispute — a live warning

More than 600 mechanical and electrical workers at Hinkley Point C have been off site since 2 June 2026 following a dispute with the MEH Alliance over pay and conditions. Under the Employment Rights Act 2025, dismissal for taking industrial action has been classified as automatically unfair since 18 February 2026. Any construction employer that issues disciplinary notices or terminates workers participating in protected industrial action is now in the territory of uncapped automatic UD claims. Hinkley is not a one-off — it reflects the new enforcement environment that will hit construction employers throughout the sector.

3. NLW + NIC + steel: the cost stack keeps growing

Combine the steel tariff impact (£75–£300/tonne), the National Living Wage increase to £12.71 per hour from April 2026, the employer National Insurance increase (effective April 2026), and the UD compliance cost of proper documentation, HR process, and potential tribunal exposure — and the margin picture for construction SMBs in the second half of 2026 is materially worse than it was in Q1.

What Construction SMBs Must Do Now

On steel costs

• Re-tender or re-price open quotes — if you have submitted fixed-price quotes that assumed pre-tariff steel costs, review exposure now. Price escalation clauses are worth including in any new contracts
• Talk to your steel supplier about forward purchasing — some fabricators and merchants can lock in prices for 3–6 months. This hedges your exposure while the market adjusts
• Separate fabricated steel from structural steel in your contracts — fabricated steel is outside the tariff regime; making this distinction in supply chain contracts may reduce your tariff exposure
• Register your interest in government supply chain support schemes — the BCSA is lobbying for fabricated steel inclusion; staying informed means you can act quickly if relief schemes are announced

On unfair dismissal from July 1

• Issue written statements of particulars on day one — this is already a legal requirement. From today's hires, it is also your first line of evidence in any tribunal claim
• Set up a probationary period review process — the six-month qualifying period means any performance or conduct issues need to be addressed, documented, and resolved within the first five months if you want the flexibility to exit before UD rights crystallise. An undocumented dismissal at month four carries significant risk if contested
• Train your site managers on what they can and cannot do — verbal dismissals, unilateral contract changes, and constructive dismissal pressure are the three most common tribunal triggers in construction. Site managers who issue dismissals informally are creating uncapped liability from January 2027
• Document every disciplinary action, absence record, and performance conversation — with uncapped awards coming in January 2027, the cost of inadequate records has fundamentally changed. Your evidence vault is not optional
• Review your subcontractor and labour-only arrangements — worker status misclassification claims are a separate route to employment tribunal exposure. If your PAYE workforce is supplemented by LOSC arrangements that look like employment in practice, the UD exposure may extend beyond your directly employed headcount

How ComplianceAlert Helps Construction Businesses

ComplianceAlert monitors employment law and regulatory changes in real time and alerts your business the moment something affects you. For construction SMBs, the Action Centre includes pre-built compliance templates for exactly the scenarios you face from today:

• Hire-date UD tracking — log new hires and track the six-month UD threshold for each employee, with automated reminders when probation reviews are due
• Written statement templates — issue legally compliant day-one employment particulars without instructing a solicitor for every hire
• Probation review checklists — document every review, every performance conversation, every disciplinary action with timestamps and evidence links
• Evidence Vault — store disciplinary records, right-to-work checks, training certificates, and site safety records in one place. If a tribunal claim arrives, your evidence is retrievable in minutes — not a filing cabinet buried on site

Ask Alice, ComplianceAlert's built-in compliance assistant: "Which of my new hires are approaching their six-month UD threshold?" — and she'll check your live workforce data and give you a specific list, not a generic answer.

When an inspector or employment tribunal asks for your compliance records, you can export your full Inspection Pack in one click — every action, every checklist, every piece of evidence, ready to hand over.

Start free at compliancealert.co.uk/construction — no card required.

Frequently Asked Questions

Does the six-month UD rule apply to workers I hired before 1 July 2026?

No. Workers hired before 1 July 2026 retain the existing two-year qualifying period. Only workers whose contracts of employment begin on or after 1 July 2026 are subject to the new six-month threshold.

When do uncapped UD awards take effect?

From January 2027. Section 124 of the Employment Rights Act 1996 — which set the compensatory award cap at the lower of £115,115 or 52 weeks' pay — has been repealed under the Employment Rights Act 2025. Tribunal awards made from January 2027 will reflect actual financial loss with no statutory ceiling.

Does the steel tariff apply to all steel we purchase?

No. The 50% above-quota levy applies to imported steel up to and beyond the reduced quota. Fabricated structural steel and pre-fabricated components are currently outside the tariff scheme — which is why the BCSA is warning of offshoring risk for fabricated steel manufacturers.

What counts as a "new hire" for the UD trigger?

Any individual whose contract of employment begins on or after 1 July 2026. This includes direct hires, apprentices, and workers who were previously on zero-hours or casual contracts but transition to employed status from this date. It does not include existing employees whose contracts continue unchanged.

Can I use a probationary period to avoid the six-month UD threshold?

A probationary period is not a shield from unfair dismissal — it simply sets expectations. What matters is whether you have a fair reason for dismissal and whether you have followed a fair procedure. A well-documented probation process that identifies genuine performance concerns, gives the employee opportunity to improve, and records all conversations is your best protection.

The Bottom Line for Construction SMBs

1 July 2026 is not a theoretical compliance date — it is the day two live changes simultaneously hit your cost base and your employment liability. Steel costs are up. Every new hire now comes with six-month UD exposure. From January 2027, tribunal awards are uncapped.

The businesses that will navigate this best are the ones that treat compliance not as a paperwork burden but as operational infrastructure. Written contracts. Documented probation reviews. Evidence that you followed a fair process. These are not bureaucratic niceties — they are your financial protection in a sector where employment claims are on the rise and awards are about to get bigger.

👉 compliancealert.co.uk/construction — free forever, no card required

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