January 5, 2021
The government’s focus on construction as we seek to rebuild and recover from the most turbulent year on record is reassuring. It is, in theory, excellent news for those in the sector – but in reality, we are walking on a knife-edge. On one side lies recovery and prosperity. On the other, stagnation and pent-up disputes. Which side we come down on will depend on how the sector navigates the challenges ahead.
If someone tells you it’s not possible to plan, ignore them and start planning. The COVID-19 pandemic threw a spanner in the works in 2020, but it doesn’t mean planning should go out of the window.
We know what the vast majority of risks to businesses are going to be, so explore all of the potential risks
from all external factors, including labour and materials shortages, and plan detailed scenarios that cover how you will overcome the issues to avoid delays or to document and record potential disruption.
Take time out to review your contracts. Examine what best practice is going forward and decide which current contracts pose the biggest risks with regard to delay or disruption. As a developer or employer, focus on good project and contract management, particularly around notices and agreed project plans.
Avoid or mitigate disputes
As we continue to support businesses in the sector and help them to prepare for the year and the legal and regulatory challenges ahead, particularly in the context of Brexit, it’s clear commercial tensions are high and that pent-up disputes are one of the biggest issues on the horizon. Disputes won’t always be avoidable, but they can be less of a headache if records are in order well in advance. There is a real risk that, if disputes are not resolved quickly and efficiently, the market could become stagnant, unable to move forward and grow.
Consider taking a more collaborative approach to future/new contracts. In a volatile socio-economic climate, it may be prudent to accept and share risk more evenly when drawing up contracts.
Contractors simply won’t accept all the risk and the supply chain is not in a position to bear risk-dumping without seriously threatening the financial viability of many smaller companies.
Skills shortages have challenged the sector for many years and have typically been plugged with skilled labour from overseas, but Brexit brings new challenges to the entire recruitment process and migrant worker eligibility. Consequently, the sector continues to call for more Government support.
The ONS reports that more than nine per cent of the UK construction sector workforce are EU nationals: with around 74,000 people working in the construction industry in the North East alone (ONS, December 2020), that would be roughly 6660 skilled and semi-skilled EU workers who, if they left the country, would take time and money to replace.
The squeeze on margins as labour demand outweighs supply is an imminent and long-term risk and so the sector needs to collaborate to help meet the predicted demand for an additional 200,000 construction workers in 2021. Ensure your recruitment process is Brexit-ready and that you fully understand new visa criteria and processes, and factor longer recruitment lead times into project planning.
The vaccine rollout has started but social/working restrictions are likely to remain in place for some time. To avoid site shutdown or employee absence, follow Government guidelines and enforce consistent use of PPE, keep up-to-date with guidance, along with any changes that relate to tiered restrictions, and make sure your team feels safe.
Careful preparation and understanding the risks and opportunities that 2021 will present will be the key to improvement over the next 12 months.
Simon has more than 30 years’ experience in the construction industry, specialising in dispute resolution in the infrastructure, energy, PFI/PPP and subsea and offshore sectors for a wide variety of public and private sector clients. He is a Visiting Fellow
at the Faculty of Engineering and the Environment at Northumbria University.