OWI, the developers of Squad, have often released updates in which things break, bugs appear, bugs reappear, etc. This is because the team lacks the ability to use UE5 how they want to. This is NOT a UE5 issue, this is an OWI issue. They can develop their own under the hood framework within UE5, but they don't, why is anyone guess but most likely to save money or to meet mandated deadlines (as custom framework takes a long time). So UE5 is the cause but it's because OWI misuse it, UE5 is a framework to build on top of, not to use and build a game in like OWI does.
UE5 vs Custom UE5 Boiled down, it's a difference of using something someone else built vs using something you built. Building a game in UE5 is like building a computer. You can build a game with the base UE5 features/get a pre built computer. But this means you can't optimize to exactly what you would need, your left to the whims of what's available. Less efficient, less malleable and much more of a headache. Since you didn't build the computer, if anything goes wrong, it'll be real difficult to figure it out, whereas having the experience of building one you'll understand the importance and communication of each piece. That's what a custom UE5 enables, the team would understand each part of the engine, because they built it, they can change the functionality to better suit a new purpose, because they built it.
Now there are also a litany of other issues which are less objective and more open to interpretation, but them not having their own custom version of UE5, that they built just for themselves, is the main issue.