Interest Rates up, but Economy potentially down in 2023

Interest Rates up, but Economy potentially down in 2023

Monetary Policy Summary, May 2022

The MPC voted by a majority of 6-3 to increase Bank Rate by 0.25 percentage points, to 1%.

Commenting on the increase FIS CEO Iain McIlwee stated:

“It is clear that the bank needs to act as inflation is well above the 2% threshold and if you look behind the numbers, those 3 members that were not in the majority actually favoured a higher increase, that is to push the Rate by 0.5 percentage points, to 1.25%.  Clearly this is a difficult balancing act, but whilst rates rising is not typically good news for construction, inflation is the bigger challenge and in terms of volumes we should not be too concerned as this increase was anticipated an is already factored in to much of the investment out there.”

Global inflationary pressures have intensified sharply following Russia’s invasion of Ukraine. This has led to a material deterioration in the outlook for world and UK growth. These developments have exacerbated greatly the combination of adverse supply shocks that the United Kingdom and other countries continue to face. Concerns about further supply chain disruption have also risen, both due to Russia’s invasion of Ukraine and to Covid-19 developments in China.

UK GDP is estimated to have risen by 0.9% in 2022 Q1, stronger than expected in the February Monetary Policy Report. The unemployment rate fell to 3.8% in the three months to February, and is likely to fall slightly further in coming months, consistent with a continuing tightening in the labour market and with a margin of excess demand at present. Surveys of business activity have generally remained strong. There have, however, been signs from indicators of retail spending and consumer confidence that the squeeze on real disposable incomes is starting to weigh on the household sector. The level of GDP is expected to be broadly unchanged in Q2.

Twelve-month CPI inflation rose to 7.0% in March, around 1 percentage point higher than expected in the February Report. The strength of inflation relative to the 2% target mainly reflects previous large increases in global energy and tradable goods prices, the latter of which is due to the shift in global demand towards durable goods and to supply chain disruptions.

FIS Members can access the latest construction forecasts from the economics team at the Construction Products Association here 

The Committee’s updated central projections for activity and inflation are set out in the accompanying May Monetary Policy Report. The projections are conditioned on a market-implied path for Bank Rate that rises to around 2½% by mid-2023, before falling to 2% at the end of the forecast period. Fiscal policy is assumed to evolve in line with announced Government policies. Wholesale energy prices are assumed to follow their respective futures curves for the first six months of the projections and remain constant beyond that, in contrast to futures curves, which are downward sloping over coming years. There are material risks around this assumption.

In the May Report central projection, CPI inflation is expected to rise further over the remainder of the year, to just over 9% in 2022 Q2 and averaging slightly over 10% at its peak in 2022 Q4. The majority of that further increase reflects higher household energy prices following the large rise in the Ofgem price cap in April and projected additional large increase in October. The price cap mechanism means that it takes some time for increases in wholesale gas and electricity prices, and their respective futures curves, to be reflected in retail energy prices. Given the operation of the price cap, consumer price inflation is likely to peak later in the United Kingdom than in many other economies, and may therefore fall back later. The expected rise in CPI inflation also reflects higher food, core goods and services prices.

Underlying nominal earnings growth has risen by more than projected in the February Report and is expected to strengthen in coming months, given the further tightening of the labour market and some upward pressure from higher price inflation. Companies generally expect to increase their selling prices strongly in the near term, following the sharp rises in their costs, with many reporting confidence that they will be able to rebuild at least some of their margins.

Nonetheless, in the May Report central projection, UK GDP growth is expected to slow sharply over the first half of the forecast period. That predominantly reflects the significant adverse impact of the sharp rises in global energy and tradable goods prices on most UK households’ real incomes and many UK companies’ profit margins. Although the unemployment rate is likely to fall slightly further in the near term, it is expected to rise to 5½% in three years’ time given the sharp slowdown in demand growth. Excess supply builds to 2¼% by the end of the forecast period.

For more market insights from the FIS click here

 

FIS Members optimistic about volumes, but concerned about inflation

FIS Members optimistic about volumes, but concerned about inflation

In 2022 62% of FIS Members are anticipating growth in workload, but have advised caution that labour shortages could constrain demand.

In the Q1 2022 State of Trade Survey, run in partnership with the Construction Products Association, overall volume is encouraging with the majority of members reporting growth in both sales and workload and predicting this will continue through the year.

Concern comes when we look at the costs and with inflation across the board biting hard and a number of members expressing concern about the impact of this in a fixed price environment.  Labour Availability is likely to be the biggest constraint on growth, however the added uncertainty these record levels of inflation are undermining confidence with nearly 40% of members suggesting a combination of demand side challenges and material price increases could impact forecasts.

Commenting on the report FIS CEO Iain McIlwee stated:

“It is so difficult to look ahead in the world as it is, as one crisis ends there seems to be another waiting just around the corner, but despite this there is optimism in the survey and once more I find myself in awe at the amazing resilience and flexibility that I see through our supply chain .  Certainly, in the near term, inflation is a huge challenge and it will not only put pressure on the viability of projects, but unless pragmatism is applied to the lump sum, fixed priced project approach it will undermine the viability of some in the supply chain. Structurally too the labour market challenge is significant – we have included some of the headline numbers in this report to emphasise that action is needed to join up the education and work market and support this industry in finding new people or we simply won’t be able to get the work done and construction’s ability to drive growth in the economy will be limited”.

You can download a copy of the FIS State of Trade Survey Q1 2022 here.

New Construction Product Availability Statement April 2022

New Construction Product Availability Statement April 2022

Statement from John Newcomb, CEO of the Builders Merchants Federation and Peter Caplehorn, CEO of the Construction Products Association, co-chairs of the Construction Leadership Council’s Product Availability working group

There has been little change in respect of overall product availability since our last report with a good supply of most products and materials across the UK. That said, previously reported challenges remain for bricks, aircrete blocks, some roofing products, some sanitaryware imported from Asia and gas boilers, all of which are experiencing longer lead times.

The impact of the war in Ukraine is only beginning to be felt by UK construction. There are reports of nickel prices doubling since the conflict began (Russia was a major supplier before sanctions hit), which affects the price of stainless steel. The prices of copper, steel, and aluminium have increased. Taken together with a shortage of supply from major neon producers in Odessa and Mariupol and existing Covid-related bottlenecks for microchips and semiconductors from Asia, the electrotechnical sector is now experiencing inflation on products above 20% as well as price rises between 10-20%. Recent increases in the price of oil will likely affect both fuel and plastics. Although there are no issues expected for structural timber, birch plywood (widely used as a finishing product) and Russian redwood (a predominant source for mouldings) will be affected.

Otherwise, the biggest concern is the rate at which increased energy and raw material costs are driving up prices, particularly for steel, cement, glass and other energy-intensive products. The last three months have seen price inflation of 10-15%, on top of price increases introduced at the end of last year.

While this is challenging for UK construction firms, the impact is greatest for small and medium sized enterprises (SME), which account for most of the industry’s businesses and nearly all of the builders and contractors. While the first quarter was busy for those completing existing projects, there were signs of a dip in demand in home improvement work in March compared to a considerable uplift at the same time last year.

Without price continuity, it is harder for trades to quote for projects on fixed price contracts, and then seek to pass onto their customers any price increases for materials that would otherwise erode their profit margin. Furthermore, as manufacturers reprice materials and SME contractors continue to be required to sign up to fixed price contracts in advance of project delivery periods, considerable pressure is mounting on SMEs at delivery level.

Discussions are taking place within CLC to identify ways and means to manage and mitigate price inflation. We will only achieve a solution that works for industry and clients if everyone collaborates and shares responsibility.

Read the latest FIS statement and resources produced by FIS to support members working at a time of high inflation

New Guidance on quotes and contracts in a time of high inflation

New Guidance on quotes and contracts in a time of high inflation

Off the back of the latest wave of inflation and the most recent statement by the Construction Leadership Council, FIS has produced two new resources to support contractor members.

The first, is a new factsheet that includes recommendations on standard terms to include on quotations that better protect contractors.  The factsheet also provides some basic advice around managing and reviewing contracts in a time of high inflation.

The second resource is a template letter that can be used as a guide for members who find themselves stuck in a fixed price contract  and price changes are now impacting on the viability of the project, the two resources can be downloaded by members below and have been added to the growing array of resources available in the FIS Contractual and Legal Toolkit.

Commenting on the production of the new resources FIS CEO, Iain McIlwee stated:

“These really are unprecedented times and, whilst there is little we can do to stem the tide of price rises, we can ensure that we do all we can to ensure members that have access to the best advice available.  These resources will be discussed at our up and coming webinar on how to review a contract on the 4th May.”

You can read the latest FIS and CLC Statements on Inflation here

FIS Statement: Inflation and Product Availability in the finishes and interiors sector, the what, why, when and how?

FIS Statement: Inflation and Product Availability in the finishes and interiors sector, the what, why, when and how?

FIS Statement on Inflation and Material Shortages (March 2022)

The past two years have, without doubt, been some of the hardest times businesses in the finishes and interiors sector have faced.  Uncertainty and challenge continues into 2022.  After rapid inflation in 2021 across all material groups, the year started with concerns around the impact of ongoing labour shortages, but in recent weeks the escalation of tragic events in Ukraine have started to put pressure on energy and fuel prices further pressure on the supply chain.  This has resulted in the announcement of further price increases and rapid inflation for key materials.  Of particular concern for FIS members are increases in insulation, steel and plasterboard.

Where this impacts existing contractual relationships members are reminded to check contractual terms and consider the relevance and application of any fluctuation clauses.  If you are unable to rely on standard fluctuation clauses, an early conversation with your client in terms of your ongoing ability to fulfil the contract in the wake of rapid and unexpected price increases is essential.

Where you are currently tendering, consider carefully the impact of the current inflationary environment, look to link any fluctuation to material and product prices rather than general inflation or ensure that quotes are time stamped and limited.  Where you cannot negotiate a shared risk approach with your client, you need to seriously consider what could worse case scenario mean to your business if prices drifted?

We encourage all in the construction sector to consider seriously the impact of imposing fixed prices at this time.  The sector is working on every tighter margins and this could impact the resilience and ongoing viability of of businesses in the supply chain.  Where concerns are raised, a pragmatic, understanding and collaborative approach is essential.  It is vital that we work together to avoid conflict and we further encourage all companies to consider signing and adopting the principles set down in the Conflict Avoidance Pledge that has be developed by the Royal Institute of Chartered Surveyors (RICS) and endorsed by the Construction Leadership Council (CLC).

Below we provide some information on the market forces that are resulting in ongoing inflationary pressures and additional advice and guidance related to managing businesses and contracts in a high inflation environment.

The aim is to keep it refreshed so our members are have a clear picture and can have informed decisions up and down the supply chain (last updated 31st March 2022)

Demand Related Issues

The impact of higher than anticipated demand in key sectors like housing and the domestic refurbishment sector (fuelled by growing household savings) have exceeded expectation.  It is not simply UK demand, but we operate in an increasingly globalised market.  A surge in Chinese consumption is linked to faster than expected recovery from the pandemic fuelling property development and investment in infrastructure and notably by global demand for appliances and electronic goods (many of which are manufactured in China).

Supply Side Issues

As we step into 2022 the rapid escalation of events in the tragic Ukraine has sent oil and gas prices and hence energy costs across the world into a period or rapid inflation which is now feeding through into the price of construction products and logistics.   Since 1 April 2021, wholesale gas had risen from around of 50p/therm to around £2.80/therm by the end of March 2022.

You can track natural gas prices here.

Whilst the UK in not overly reliant on Russia or Ukraine for construction products (which together account for just 1.2% of imports of construction products, some areas such as flat glass and certain timber products have a more significant share from these markets.  Projects could also be impacted by shortages of products such as concrete reinforcing bars or other unrelated shortages (such as bricks) which are still ongoing.

The global situation remains volatile and it is impossible to predict accurately the ongoing impact on material and product prices.  Beyond the escalation in Ukraine, tension between the US and China and genuine concerns about UK Conformity Assessment (UKCA) marking implementation limiting availability at the start of 2023 as manufacturers struggle to get products tested in a compliant fashion in time and guidance remains unclear.

Logistical and Freight Challenges

Beyond supply and demand, inflation and availability problems has been further compounded by a number of issues related to freight and logistics, in 2021 we had the Suez Canal logjam, Brexit and pandemic uncertainty .  An ongoing shortage of lorry drivers has also been reported and has put upward pressure on transport costs.   Whilst shipping freight prices have started to ease in 2022, the invasion of Ukraine has pushed up fuel prices.

What’s going on with shipping rates? – McKinsey’s analyse why container shipping costs are surging and give their take on what lies ahead for the industry.

Squeezing the supply chain

A key concern is that in the wake of double digit inflation in the price of some materials and increasing labour costs and despite an increasingly healthy pipeline, we are not seeing equivalent inflation in tender prices, which means margins are likely to be squeezed and in extreme cases businesses could be driven into recession.

The  latest tender price reports from MACE is showing that current tender price inflation ran at 7.5% in 2021 and are expected to rise by 5.5% in 2022.

How can I track and report price movements?

There isn’t currently an index of prices specific to products in the Finishes and Interiors Sector, but you can draw out the main material movements via the Office of National Statistics, note this is lagging and prices are changing fairly rapidly at the moment.  It also doesn’t necessarily reflect prices on the ground due to specific grades/distribution buffering etc.

The World Bank commodity price index and London Metals Exchange give a high level picture, but doesn’t get into the detail on products used in the finishes and interiors sector.

The RICS publish the annually the BCIS Material Price Index

Probably the best reference is via the merchant groups, for example :

For the sake of balance, if you publish a similar index, please don’t hesitate to pop a link over by email or in the chat and we’ll include it here.

Information on price of paint from the British Coating Federation

FIS track labour prices on a half yearly basis with information available to contributors.  If interested in learning more email iainmcilwee@thefis.org.

When can we expect an end to all of this?

With such a perfect storm of complex and cumulative issues it is difficult to know when we will start to notice improvement or how much worse things may get.  The old adage hope for the best, but prepare for the worst comes to mind.

Certainly data from the RICS (published November 2021) construction materials costs in the UK continue to escalate, reaching a 40 year high based on the annual growth of the BCIS Materials Cost Index.  According to Joe Martin, BCIS Lead Consultant “The pressure on materials prices and availability is expected to continue at least until the end of 2022. Labour shortages are expected to evolve as the significant driver for overall construction cost increases next year and the construction sector would need to compete for it with other sectors”.

Above was before the situation escalated in the Ukraine.  The Construction Products Association have prepared for FIS Members an update on the wider impacts of this tragic conflict.

Top tips for contracting in a high inflationary market

FIS have produced a new factsheet for members looking at some standard clauses to include with quotations and top tips for contracting at a time of high inflation.

Bring your concerns to FIS

If you feel you are being treated unfairly, talk to us, we will do what we can.  We can, through our own contacts in the industry, the CLC and contact with the Small Business Commissioners Office and Civil Service shine a light on negative trends and poor behaviour, it can be done anonymously and handled sensitively so as not to damage your relationships.

FIS is urging the supply chain to heed the advice of the Construction Leadership Council and adopt a collaborative approach and ensure that there is ongoing and open communication through the supply chain and we are doing all we can to work together rather than tearing lumps off of each other.

Too often construction get contractual and adopts a siege mentality, parcelling up and firing risk out hoping it sticks elsewhere.  The much talked about transformation must start now, rather than pushing risk down the supply chain, we need to be communicating with clients, helping them to understand that these events are beyond the control of individual companies and we need to work together to resolve and manage.

Our supply chain has had an unprecedented and difficult year, we need to nurture it back to health, not return to old and punitive ways that will ultimately drive people out of business to the detriment of all.

Useful links:

FIS Webinar: Managing your business in a time of shortage – Listen again here

You can access the latest Construction Leadership Council Product Availability Statement here (21 April 2022).

The Highway Code: update to rules on using mobile phones

The Highway Code: update to rules on using mobile phones

From today (25 March), rules in The Highway Code are coming into force to make any hand-held use of a mobile phone while driving illegal, except in limited circumstances.

This means you must not use a device in your hand for any reason, whether online or offline. The law applies to you if you’re:

  • supervising a learner driver
  • stopped at traffic lights
  • queuing in traffic
  • driving a car that turns the engine off when you stop moving
  • holding and using a device that’s offline or in flight mode

There are exceptions, such as if you need to call 999 or 112 in an emergency or making a contactless payment in a vehicle that is not moving.

You can find the full rules on using a phone, sat nav or another device when driving on GOV.UK

 FIS members are advised to review policies and advise employees who drive whilst on work duty.

To help re-enforce, the government’s award-winning THINK! team has launched an awareness campaign today to remind drivers not to use a hand-held phone at the wheel and the penalties of choosing to ignore this new law.  This includes the infomercial below that can be circulated with the updated guidance to employees:


 To visit the FIS Health and Safety Toolkit, click here

UK Conformity Assessment Bodies: using a subcontractor

UK Conformity Assessment Bodies: using a subcontractor

New guidance has been published for UK Conformity Assessment Bodies (CABs) who are intending to subcontract tasks such as testing, certification or inspection.  This process will limit the the need to test new products in the UK and Europe separately for the purpose of conformity marking (UKCA and CE Marking).

Overview of Guidance

Subcontracting is the act of contracting another body to do a task, which you have been appointed to perform, as part of the conformity assessment process. This is also commonly referred to as ‘outsourcing’.  UK CABs can subcontract most tasks within the UKCA conformity assessment process, such as testing, certification or inspections. However, the decision on conformity itself must be made by a UK CAB.

If a CAB has an overseas subsidiary, the subsidiary to carry out the conformity assessment activities subject to the same conditions as using sub-contractors.

Subcontracting does not include when individuals are contracted-in as employees of a UK CAB (regardless of where they are employed). These individuals fall under the quality management system of that body.

There may be different conditions for products approved under the terms of a mutual recognition agreement (MRA) with the UK. The requirements for CABs are detailed within these agreements.

Note EU does not afford a reciprocal privilege to Notified Bodies for CE marking and this process will not impact legacy testing, where the lack of mutual recognition in the Exit Agreement prevents recognition of historic testing or Engineering Assessment Documents for some CE Market products (those covered by ACVP 3).

More information on sub-contracting is available on the Government website here

To access the FIS Brexit Toolkit click here

FIS encourages members to take the Pledge to change the training culture

FIS encourages members to take the Pledge to change the training culture

Pledge to #BuildTheFuture

To support the new Interior Systems Installer Apprenticeship Standard, with its pathways for Drylining and Ceiling Fixing and Partitions and to grow support for the existing framework in Wales and the Scottish Modern Apprenticeship, FIS is encouraging members to sign a new Interior Systems Installer Apprenticeship Pledge.

The sector is being hard hit by a skills shortage, with a recent survey highlighting that over 60% of FIS Members are now impacted.  Problems are expected to worsen over the summer and, with new data from the ONS suggesting that the net migration of labour could be worse than many feared, a collective effort from the sector is essential.  In Q1 2019, the finishes and interiors sector was reliant on EU workers for 40% of its workforce – the latest ONS data, indicates that, by the end of Q1 2021, the number of EU construction workers available has fallen by a worrying 46%.

“The sector has relied on a flow of new skilled workers from the EU, but the new immigration rules have well and truly turned this tap off.  Before you factor in those EU workers that have left and may or may not come back, we need to fill the void left by those that would, in the past have come.  This means doubling our numbers for domestic training programmes.  For every 5% of EU Workers that do not return, this number doubles again!  We need to adjust our approach now and ensure that we are doing all we can to attract and train a new army of workers.  The Pledge is very much a rally call to our sector – we need to work together on this one.”

Commenting on the work so far, Damian Treanor of Errigal stated:  “We need to get acknowledgement that Drylining is fully recognised as a professional trade within our industry.  It is time for all contractors within the finishes and interiors sector to take a united approach in the recruiting, training and development of our young people to secure a stable growth for the future.

No matter what size of business, if you are developing your culture with a view to a long term approach we would encourage all to consider taking the pledge.

Like others, we have established a successful 2 year apprenticeship with an additional 2 years CPD programme to further develop skills and knowledge. The Drywall trade is at the forefront of all internal works within the industry and we need all major clients and contractors to recognise the importance of a collective training approach for the future of the trade.”

So far the initiative is off to an encouraging start with signed Pledges received from Errigal Contracts, Measom, Tapper Interiors, Veitchi Group, ATJ Group, Horbury Group, CG Reynolds, SCL Interiors and Platt and Reilly.  Already this collectively amounts to a commitment of over 150 new apprenticeships per year over the next 5 years.

The pledge is based on a focus on culture, commitment, collaboration and quality.  As part of its own commitment to the Pledge, FIS is working to build a network of Approved Providers, develop resources to support consistent delivery and working closely with individual employers to help align support, funding and structure their apprenticeship programmes.  FIS is also working to support recruitment through the FIS BuildBack programme and through the Government’s Kickstart scheme.  The work is being led by a dedicated Employers Group which is helping to support a collaborative and focussed approach.

Early adopter, Andrew Measom who has played an active role in the employers group leading this work added “Apprenticeships are essential in addressing the labour and skills gap in our industry.  They are a productive and effective way to bring in and grow young talent and develop a motivated, skilled, and qualified workforce. If a fixer has come through the apprenticeship, we can be confident they have been trained to a consistent standard”.

FIS Skills and Training Lead George Swann said, “by taking on an apprentice your organisation is investing in its own future, its own succession plan. There are numerous well documented benefits to investing in apprenticeships including a positive impact on productivity.  There is now no age limit for an apprentice and at this time there are a number of attractive financial incentives for employers.  If you need more information give us a call, FIS can help with recruitment, selection and finding a reliable Training Provider”.

Skills Hub

The Skills Hub brings together details of courses specific to the finishes and interiors sector, making accessing and booking training quick and easy. In addition, it provides information on sector careers, apprenticeships and funding, as well as access to e-learning, CPD and other training.

It feels like a full frontal assault on construction from Gove

It feels like a full frontal assault on construction from Gove

This week FIS attended a meeting of the Construction Products Association to look at feedback from a Round Table Meeting for Product Manufacturers with Secretary of State, Michael Gove, and his team.  The approach (see here) is that the Government expects Industry to fnd a way to meet the financial shortfall in cladding replacement on buildings over 11m.  Their priority is to protect leaseholders.  Similar meetings have also taken place with Developers.

FIS members are, in the main one step removed from this or not directly involved in cladding issues, but our concern remans that this is the tip of the iceberg.  FIS CEO Iain McIlwee commented:

“This is starting to feel like Round One of a boxing match and Governent has come out swinging.  There is alot of threat, but not much weight in the punches at the moment, but they seem to have us on the back foot and up against the ropes. I think the concern for me is I can’t see the barrage ending and it feels like they are trying to bully us into submission. I am also concerned that these haymakers are distracting us from the big knock out punch that could come from the recent vote in the Commons on the Defective Premises Act.  A retrospective impact of 12 years was already difficult to absorb, but can you imagine how hard it will be to pull out records from projects that are 30 years old!”.

The Defective Premises Act was debated in the Commons in January and the ammendment below successfully voted.

“That is why we tabled Government amendment 41, which will retrospectively extend the limitation period for section 1 of the 1972 Act to 30 years, meaning that there will be access to this route of redress for buildings completed from mid-1992 onwards. That represents a substantial extension beyond the current six years. I recognise that changing the law in this way is unusual and that 30 years represents a long limitation period. However, I consider that the exceptionality of the current circumstances in respect of cladding and other serious fire safety defects warrants the longer retrospective limitation period of 30 years.”

It should be noted that this does not mean it will be passed in law and Parliamentary processes will subject it to further scrutiny, but the direction of travel it is not good news for construction.  FIS has again raised concerns through the CLC and our Umbrella lobby groups (CPA and BuildUK) as well as directly with MPs making the points:

  • The period of 30 years steps outside any contractual obligation or insurance provision.  Effectively this is a retrospective uncapped liability.
  • Proving liability will be diffcult as records are likely to have been destroyed (there was no obligaton to maintain records for this long).
  • The behaviours this will drive will echo the PFI, forensic surveyor engaged exclsively to reallocate risk and lead to adversarial relationships.
  • The likelihood is a lot of the blame will cascade to the Specialist Contractors who signed unfair contracts and operated under conditions where they were not set up to succeed due to procurement and contractual processes.
  • Many will no longer be trading and few in the construction industry will have sufficient resource to carry this, effectively they will be put out of business and the problem will not be solved.
  • We already have an insurance crisis, this may make it difficult to secure insurance at a realistic price

One FIS member put it well:

“On the face of it, it will be very hard to impliment and I think it will only really serve to keep lawyers in fees! We priced and designed based upon the applicable laws at the time, move the goalposts afterwards and there is a whole area for debate that goes nowhere near whether the actual installation was compliant with the guidance at the time and the accepted industry practices of that period.”

FS has long advocated an insurance based levy, similar to the Pension Protection Fund that would help share and phase payments fairly over time.

It feels like a full frontal assault on construction from Gove

Discussions with government start on remediation funding proposals

Yesterday the Construction Products Association met with the Rt Hon Michael Gove MP, Secretary of State at the Department for Levelling Up, Housing and Communities (DLUHC) to discuss his demand for a contribution he believes that cladding and insulation manufacturers will need to make to help fix the crisis currently impacting leaseholders of buildings that require remediation.  The meeting was also attended by Lord Stephen Greenhalgh (the Minister for Building Safety and Fire), members of the department’s Residents Voice and Building Safety Levy team, and a handful of CPA company members within the cladding and insulation sector who were directly invited by the department.

Reiterating what he wrote to the CPA before the meeting, the Minister made clear that he is expecting a clear commitment from the (cladding and insulation) sector to make financial contributions in this year and in subsequent years, as he has already asked property developers to do.  The CPA’s response to that same letter can be found here.

Subsequent meetings between the CPA and DLUHC are expected over the coming weeks in order to discuss and study the matter further.  FIS is an active member of CPA and through this membership, our members access additional technical support and market intelligence as well as benefit from representative support from this umbrella body.  If you have any points to make on the letter or the CPA response, don’t hesitate to contact Iain McIlwee, FIS CEO (iainmcilwee@thefis.org).  Iain is currently a Vice Chair of the CPA.

CPA Chief Executive Peter Caplehorn has been invited to give oral evidence at a meeting of the House of Commons Levelling Up, Housing and Communities Select Committee, on the subject of “Building Safety:  Remediation and Funding”, and relates to the CPA’s recent meeting with Secretary of State Michael Gove.  The session is planned for Monday, 31 January at 4pm.  Click here for further information and to watch the session.

For the FIS response to the initial open letter from Secretary of State Michael Gove, click here

 

 

 

FIS Writes to Mayor of London on calls for temporary visa scheme

FIS Writes to Mayor of London on calls for temporary visa scheme

FIS has written to London mayor Sadiq Khan to follow up on his calls to create a temporary visa scheme for construction workers to tackle the double impact of Brexit and the pandemic on the building industry.

London Mayor Sadiq Khan is proposing that ministers create a Coronavirus Recovery Visa of at least a year, to help sectors struggling with shortages of workers, including construction.

Mayor Khan said: “Tackling London’s housing crisis has always been one of my top priorities since becoming Mayor. We’ve worked tirelessly over the last five years to get London building again, and the construction sector forms a key part of London’s Covid recovery plan. However, both our recovery and efforts to deliver the genuinely affordable homes Londoners desperately need could now be put at risk if there isn’t the skilled workforce available to build them.

“The Government must look beyond their current blinkered approach to immigration and recognise the impending crisis that is already enveloping one of our most vital industries.

“Training our own people to take on jobs in the construction sector is an admirable aim and one we’re working hard to meet but in the meantime, we need skilled tradespeople on site now to manage the short-term crisis and build a strong recovery.”

FIS has written a letter of support the the Mayor.  The organisation has repeatedly raised concerns with the Home Office over recent years that the points based immigration system fails to recognise core trades as “skilled workers”, lacks flexibility to manage “shortages” and has not factored in the impact of COVID on preparing for and now addressing labour concerns in the sector.   Often working on short notice or late in the programme, the sector is typified by rapid turnaround of projects and high levels of contingent workers, which I believe makes us more seriously impacted even than other parts of construction.

Pressure is most acute and well exemplified in the Dry Lining sector.  It is estimated there were approximately 60,000 people employed across the UK as Dry Liners at the start of 2020. To meet demand and address inevitable churn, the occupation has an annual recruitment rate (ARR) of approximately 1,200 individuals per year.  Going in to 2020 the level of EU workers was 40% across the UK, but could be as high as 80 or 90% in London.  A proportion of this workforce came to UK to work and have not put down strong roots and potentially split their time between here and home (working a few months of the year).

 In the letter FIS CEO, Iain McIlwee, comments “Before we worry about who has left, you will see the gap in our figures, across the UK (higher in London) we were hitting close to half of our annual recruitment with immigration.  Plainly put we need to double what we did in terms of recruiting domestic workers, particularly difficult in the current climate.  Beyond this, for every 5% of EU workers that have decided not remain in the UK, we need to find an additional 1,200 workers (effectively doubling our annual recruitment rate again).”

Iain goes on to inform the mayor that “The sector has been identified by CITB as a top 4 priority in terms of shortages and is actively engaged in training reform with a new Apprenticeship Standards and a number structured specialist induction and recruitment programmes run in partnership with the Department of Work and Pensions, but the education and training infrastructure needs time to develop.  We need to evolve the culture in the sector and have to remember that a new recruit tomorrow is not fully productive (in fact initially drains time) – apprenticeship and VQ durations are typically 18 months for Dry Liners and ceiling fixers and 36 months for Plasterer.  COVID has impacted our ability to prepare for and now availability of workers and wage inflation is adding to the challenge and making it more difficult to address.”

If you are having issues recruiting or want to talk to FIS about taking  on an Apprentice, visit the FIS Skills Hub  or call 0121 707 0077 and ask to speak to one of our skills and training  experts.

Changes to COVID‐19 Restrictions

Changes to COVID‐19 Restrictions

The Prime Minister has advised that from today (19th January 2021) Government is no longer asking people to work from home, recommending they speak to their employers about arrangements for returning to the office.  Employers are reminded to follow the Working Safely guidance (see below).

He also confirmed that the COVID‐19 ‘Plan B’ restrictions in England will end next Wednesday 26 January.  An end to ‘Plan B’ means the COVID Pass will no longer be required to enter certain venues and face coverings will not be mandatory in any setting although people will still be advised to wear them in crowded and enclosed spaces where they come into contact with others they do not normally meet.

The legal requirement to self‐isolate after testing positive for COVID‐19 will remain in place. However, an individual may now stop self‐isolating if they take a lateral flow test from day 5 onwards and another one at least 24 hours later, and both results are negative and they do not have a high temperature. The Build UK COVID‐19 flowchart continues to be updated in line with the latest rules.

In Scotland, the restrictions introduced in response to Omicron will be lifted from 24 January. However, individuals should continue to work from home wherever possible and face coverings will remain mandatory in certain settings.  Further announcements are anticipated for Wales and Northern Ireland in the coming days.

Free Digital Construction Helpline Dedicated to FIS Members

Free Digital Construction Helpline Dedicated to FIS Members

We are delighted to announce the launch of a new service for FIS members in 2022.  FIS have partnered with Digital Construction Skills (DCS) to give you free access to the Digital Construction Helpline. This service is FREE TO FIS MEMBERS.  There are no forms to fill in, simply book a 15, 30 or 60 minute call with a digital construction specialist who can help you:

  • Get started on your digital journey
  • Address a specific problem or challenge you are facing in your business
  • Identify the funding and support available to help you on your digital journey
  • Narrow down the technologies which could most benefit your business
  • Select the right digital tools based on your needs, budget and specific circumstances.
  • Identify skills gaps which are holding back digital progress in your business

This service is aimed at business owners, directors or senior managers with responsibility for business improvement or digital change in your company.  The DCS digital construction specialists have recent, real-world experience on the front line of the construction industry and are specialists in the technical and commercial aspects of digital construction including digitalising information flow as well as physical elements such as 3D models and reality capture – they are supported by CITB funding.  This service is ideal for you if any of the following apply to you:

  • You haven’t yet explored how digital tools can help you, but know there is room for improvement in your business
  • You have identified where you could improve your processes or activities using digital solutions and are ready to get started
  • You have already started selecting or implementing digital tools but have hit challenges or simply stalled
  • You would like to increase your profitability, grow your business or tender for bigger jobs
  • You would like to access other funding and support available which can help you with digital enablement

Here’s what others have said about the support they have received:

“Digital Construction Skills helped us access funding to help us train our staff in a new digital platform we are rolling out across our business.” – Andy Dalrymple, Managing Director, Mackenzie Construction

“Within our first session with Digital Construction Skills, we identified the types of digital tools which could help us save time and money and ruled out the ones that weren’t relevant to us.” – Keith Burrell, CEO, Procladd (Scotland) Ltd

Commenting on the new service FIS CEO, Iain McIlwee stated:

“It is great to partner with DCS to support the work of our Digital Construction Working Group. This is an area we know we are lagging a bit relative to other parts of the economy and where massive opportunity is mirrored by often impenetrable language.  Our starting point is looking at the tools we can use to help improve productivity, but also helping to improve relationships, information exchange and deliver against the requirements of the Golden Thread.  As well as the introduction of the new helpline and mentoring service, the programme this year will see a number regular workshops, built on successful integration of technology within businesses in our community.   These workshops and structured feedback through the helpline will help us to sections of our Digital Spine concept and ensure we are supporting transformation in our sector, but more importantly to help individual businesses to make the right decisions about embracing digital technology in their business.”

The helpline can be accessed via 0121 707 0077.

You can secure your space on the next interactive online workshop (focussed on Cost Management Software) here.

You can access the FIS Digital Spine here.

 

Gove warns developers, contractors and manufacturers they must fork out £4 billion

Gove warns developers, contractors and manufacturers they must fork out £4 billion

Today Housing secretary Michael Gove has warned developers, contractors and manufacturers they must fork out £4 billion to fix dangerous cladding on low-rise buildings. Whilst this may seem to be good news to some – Government has at last made a stand – our concern is the impact and ripple effect that this will have has been not been fully understood.

FIS predicted this news before Christmas and our firm view remains that the current approach is more about winning the blame game than solving the problem.

In his opening remarks Gove said it wasn’t fair that leaseholder take the financial impact, this is true but it is also true that the construction sector shouldn’t shoulder more than its fair share of the burden.  The current approach will see years of legal wranglings with costs simply being pushed down the supply chain.  The only winners will be the lawyers and the administrators and the real losers will be the small and medium sized contractors and subcontractors, who bound by heavily amended contracts (designed to deflect risk), operating in exceptionally difficult circumstances and could well be left holding the bill when the music stops. New procurement guidance targeted at stopping prioritising cost over value clearly recognises the challenges that the supply chain was under and seeks to change the culture, but this approach was endemic in the past.

Commenting on the letter FIS CEO, Iain McIlwee stated:

“This latest announcement is focussed on cladding, but we know this is not the only issue and when read in context with other correspondence and the retrospective application of changes to the Defective Premises Act it is troubling.  In his opening remarks Gove said it wasn’t fair that leaseholder take the financial impact but it is also true that the construction sector shouldn’t shoulder more than its fair share of the burden. The issue is about being proportionate. By passing the entire responsibility on to the construction sector we run the risk of derailing future work whilst we manage this legacy. It is very difficult for the industry to look forward when there is a shadow that is getting darker with every announcement looming over our shoulder.

We have to accept this is a systemic breakdown, regulation and guidance was not clear and new procurement guidance targeted at stopping prioritising cost, over value, is recognition of the challenges that much of the supply chain have been struggling with.  Unrealistic cost and time pressure have been masked by terms like value engineering and liquidated damages and dumped in “standard contracts” that were amended beyond all recognition to dump risk through the supply chain.  I remain unconvinced that the solution is in the interventions we are seeing and suspect the only winners will be the lawyers and the administrators with cost and blame being pushed through the supply chain.  A better approach is a levy based Building Safety Fund and we have written to Mr Gove and his department to recommend this.”

A better solution has to be found. FIS has long advocated – a similar approach to the Pension Protection Fund. Putting a £4 billion pound threat on to contractors, developers and manufacturer may win headlines now but it will just create an even bigger problem further down the road.

Read the full open letter from Michael Gove here

Changes to COVID‐19 Restrictions

A quick round-up of what the new COVID Guidelines mean to you

Updated 11 January 2022 – changes to testing requirements – new flowchart issued by BuildUK.  

The UK faces a new COVID challenge at the start of 2022 with evidence pointing to a highly transmissible, but thankfully less severe strain.   With the highest level of cases the UK remains on a high state of alert with tactics being adopted across the the devolved nations focussed on stemming transmission, protecting the NHS and encouraging individuals to get booster jabs.  Below is a quick summary of what the latest announcements mean for you:

In England

The key change for businesses related to the shift to Plan B is that the Government’s Working safely during coronavirus (COVID-19) have been updated to reflect that those who can, should work from home.  If an individual cannot work from home then they should continue to go into work, and hence construction, retail and manufacturing sites should continue to operate. Maintaining a safe workplace is critical and members should continue to minimise the risk of transmission.  The Site Operating Procedures remain available as a reference document and will be reviewed and updated if necessary (they have not been changed at this time).

The rules have changed regarding the required self-isolation period after testing positive for COVID-19 and Build UK has updated the COVID-19 flowchart to reflect the current position and you can find the latest version here (11.1.22).

In England, Wales and Northern Ireland an individual may test to release after 7 days, in Scotland 10 days remains the rule.  The NHS rules on when to start counting and testing are summarised below.

Day 0 Symptoms begin or test taken
Day 1 Begin counting self-isolation days
Day 2  Isolate
Day 3 Isolate
Day 4 Isolate
Day 5 Isolate
Day 6 Begin home testing – Continue to Isolate
Day 7 Self-isolation can end with two negative testes taken at least a day apart
Day 8 Self-isolation can end with two negative testes taken at least a day apart
Day 9 Self-isolation can end with two negative testes taken at least a day apart
Day 10 Isolation ends – no test required

The caveat on returning to work on day 7 is if you still have a temperature you should remain in isolation for 10 days regardless of the lateral flow test results.  In Wales and Northern Ireland the release at 7 days is dependent on your vaccination status.

The other big change in guidance relates to Face Coverings.  The CLC guidance on The Use of Face Coverings in Construction has been updated to reflect changes in the guidance. Where workers on site are not required to wear RPE, face coverings should be worn if their workplace is crowded and enclosed (which may include welfare and changing facilities, site offices, site meeting rooms or site transport) and if they come into contact with others they do not normally meet (Mask fo Task – Cover for Covid signposting available here).

The Government has confirmed that the data will be kept under ‘constant review’ and following the regulations being implemented on 15 December, they are set to be reviewed after three weeks on Wednesday 5 January and expire after six weeks on Wednesday 26 January.

In Scotland

In Scotland individuals are again recommended to work from home where possible and guidance on use of face covering has been updated to enforce use on public transport and in most indoor places, including hospitality and whilst working in other people’s homes.   On 17 December 2021, regulations were introduced to help combat transmission of the Omicron variant.

state that a person who is responsible for a place of worship, carrying on a business or providing a service must:

  • have regard to this guidance about measures to minimise risk of exposure  to coronavirus; and
  • take such of these measures as are reasonably practicable to minimise the incidence and spread of coronavirus on the premises, for example measures which limit close face-to-face interaction, such as supporting working from home, making adjustments to the premises and putting in place protective measures such as signage, screens and other mitigations

New guidance also places clear emphasis on the need for vaccination/boosters and testing – see for example the section on working in other people’s homes, where the advice is for both the workers and householders to undertake an LFT.

People are being encouraged to take a lateral flow test before mixing with people from other households.  The Scottish Government have recommended people think carefully about unnecessary contact with other people, especially in crowded places – suggesting it would be sensible to postpone work Christmas parties.

A reminder that the CICV Forum videos on wearing masks and working safely are available to use on your own social media channels and website. Click on the link to download them and help spread the health and safety message across the industry: https://we.tl/t-KOCJI7XDnD

CICV in Scotland has produced excellent guidance to cover site operating procedures in Scotland, this was updated on 24th November and whilst is under review, no immediate reaction has been recommended to deal with latest advice.

Isolation rules state that anyone contracting COVID is required to isolate for 10 days.  If you are a close contact who lives with someone who has tested positive you should isolate for 10 days even if:

  • you have had a negative PCR result
  • you’re fully vaccinated – this means you’ve received 2 doses of an approved vaccine and have had your second dose more than 14 days ago
  • you have tested positive for coronavirus in the last 90 days
  • Household contacts you must always complete the 10-day self-isolation. This includes those under 18 years old. Some health and social care workers may be exempt.

Business and organisations providing vital public services can apply for an exemption to allow essential workers to volunteer to leave self-isolation and return to work, in certain limited circumstance, to allow vital services to continue.  You must be able to demonstrate that staff shortages are in danger of putting essential functions and services at risk. You can end self-isolation if all of the following apply:

  • you’re fully vaccinated – this means you’ve received 2 doses of an approved vaccine and have had your second dose more than 14 days ago
  • you receive a negative PCR test result
  • you do not have, or develop, symptoms
  • If you’re a close contact (non-household) and you’ve tested positive for coronavirus in the last 90 days, you do not have to self-isolate or book a test if you’re fully vaccinated unless you develop new symptoms.

More on how to apply for an exemption here.

In Wales

Advice is consistent with England and the advice is that individuals should work from home wherever it is possible; and people must wear a face covering on public transport and in most indoor places, except hospitality.

The CLC guidance on The Use of Face Coverings in Construction and Site Operating Procedures stand.

In terms of self isolation in Wales, this is dependent on vaccination status.  Anyone who is a close contact of a suspected Omicron case will be asked to isolate for ten days and take a PCR test on day two and day eight, regardless of their vaccination status or age.

In other cases, if in close contact and you are aged 18 and over, and not fully vaccinated, you must self-isolate from the day you were last in contact with the person who tested positive for COVID-19 and for the next 10 days.  You should also take a PCR test on day 2 and day 8. It is important that you take the tests even if you feel well as you may have COVID-19 even if you do not have symptoms.

If you are a fully vaccinated adult, or a young person aged between 5 and 17, and you have not been identified as a close contact of a suspected or confirmed Omicron case, self-isolation and testing requirements will depend on whether someone in your household has symptoms or has tested positive.  If you live or spend a significant amount of time in the same household as someone who has symptoms you should self-isolate and take a test as quickly as possible.   If your test is negative you can stop isolating but you should remain vigilant for new symptoms. You should try to avoid contact with vulnerable family and friends in the short-term (for example elderly relatives or those who are higher risk of severe COVID-19 infection).

If the Omicron variant is suspected, you must isolate until it has been confirmed that the person who has tested positive does not have an Omicron variant. Once that happens Test, Trace, Protect service will contact you and advise on what to do next. This may mean you can leave self-isolation but it will depend on your age, vaccination status and nature of the contact.

In Northern Ireland

Individuals should work from home where possible and employers that require staff to come into the workplace must complete a mandatory risk assessment; and people must wear a face covering on public transport and in most indoor places, including hospitality.

The CLC guidance on The Use of Face Coverings in Construction and Site Operating Procedures (as guidance) remain relevant.

Anyone who is a close contact of a suspected Omicron case will be asked to isolate for ten days and take a PCR test on day two and day eight, regardless of their vaccination status or age.

If you have symptoms of coronavirus (COVID-19), however mild, you should begin self-isolating and book a PCR test. These are widely available and are free.

You should continue to isolate until the result of the test is available. If the PCR result is positive you should continue to self-isolate for 10 full days after the symptoms started.

Unvaccinated adults are required to isolate for 10 days, regardless of variant.  If you are fully vaccinated  (more than 14 days since you received the second dose of an approved COVID-19 vaccine) or you have taken part in an approved COVID-19 vaccine trial and the contact does not relate to the Omnicron variant, you do not need to self-isolate for 10 days if someone you have been in close contact with tests positive for COVID-19.  You should book a PCR test on day two and day eight of the 10-day period following last contact with the positive person.  You should also take a daily lateral flow test (LFT), starting as soon as possible after being identified as a close contact for the 10-day period.

More detail on Self-Isolation Rules in Northern Ireland here.

Summary of useful information

Government Guidance

New Plastic Packaging Tax

New Plastic Packaging Tax

From April 2022, if you manufacture or import 10 or more tonnes of plastic packaging within a 12 month period, you may need to register for the tax.

You need to register for the Plastic Packaging Tax if you’ve manufactured or imported 10 or more tonnes of finished plastic packaging components within the last 12 months, or will do so in the next 30 days. From 1 April 2022 to 30 March 2023, the 12 months threshold will be worked out differently.

You will need to pay Plastic Packaging Tax if you have manufactured or imported plastic packaging components which contain less than 30% recycled plastic.

Packaging should only contain recycled plastic where it is permitted under other regulations and food safety standards.

The tax came into force on 1 April 2022 and is charged at a rate of £200 per tonne.

What you must do

  1. Check which packaging is subject to Plastic Packaging Tax and the definitions of finished components and substantial modifications, to find out if the packaging you manufacture or import is subject to the tax.
  2. Work out the weight of the packaging you manufacture or import to find out if you must register for the tax.
  3. Find out how to register.
  4. Check which records and accounts you must keep and how to carry out due diligence.
  5. Find out if you can claim a credit or defer paying Plastic Packaging Tax.
  6. Find out how to complete your return.

Get help and support

If you have a question about Plastic Packaging Tax and cannot find an answer in GOV.UK guidance, you can ask HMRC to answer it. You should either:

The Construction Products Association (CPA) has produced a briefing paper on the effects of this new tax for FIS members.

UK Government Notice to WTO sets down future for Construction Products Regulation

UK Government Notice to WTO sets down future for Construction Products Regulation

The UK Government has notified the Committee on Technical Barriers to Trade at the World Trade Organisation (WTO) of their intention to bring into force the Construction Products Regulations 2022.  The document correspondence provides a useful update of the intent and focus of changes to the regulatory environment for construction products.  GBR45_EN

The Building Safety Bill will carry the necessary legal changes

In correspondence with the World Trade Organisation the Department for Levelling Up, Housing and Communities (DLUHC) have advised WTO thar regulations will be made under the Building Safety Bill (once it has received Royal Assent) and will extend the existing regulatory framework to cover all construction products placed on the market in the UK.  The existing regulatory framework for construction products, which derives from EU law, will remain in place for Great Britain (the EU regulatory regime for construction products will continue to apply in Northern Ireland as per the Northern Ireland Protocol). The regulation of safety critical products and the requirement for construction products to be safe will be extended to Northern Ireland.

DLUHC has also advised WTO that the intention of these regulations is to require that construction products placed on the UK market are safe, and can be used safely. It will do this by placing obligations on economic operators in the supply chain, including to carry out a risk assessment, provide customer information and to take corrective measures where necessary.

The Bill includes a power to create a statutory list of ‘safety critical’ construction product standards (where their failure would risk causing serious injury or death). The
regulations set out that manufacturers will be required to complete a declaration of performance, put in place factory production controls and follow the specified system of assessment and verification of constancy of performance to ensure that the claimed performance is consistently met. This will bring the regulation of these products in line with arrangements for products covered by the existing regulatory framework, including the affixation of a UKCA mark. Other economic operators in the supply chain will have obligations placed on them to support compliance with these requirements.

The overall aim is that regulations will strengthen the market surveillance and enforcement regime for construction products so that safety concerns can be identified and dealt with, and action can be taken against those who do not comply with the regulations. This includes powers to investigate, take civil action or prosecute economic operators for breaches in construction products regulations.

Grenfell has highlighted that “many construction products do not fall under a regulatory framework”.   

DLUHC advise WTO that changes are necessary following the fatal fire at Grenfell Tower where it became apparent that many construction products do not fall under a regulatory framework. This means that regulators lack powers to act if certain products do not perform in the way they are claimed to, or if they are unsafe. The intent is to make sure that construction products fall under a proportionate regulatory regime that protects the public effectively from products that are not safe. To be effective, reforms must achieve their objective to ensure that products are safe, and can be used safely, in a way that is proportionate to the risk posed by the product. That is why the most stringent requirements (which are equivalent to the existing regulatory regime), including providing clear and accurate performance information, undertaking third-party conformity assessment (where required) and affixing the UKCA marking, will fall only on construction products deemed to be safety critical, where their failure would risk causing serious injury or death.

Other products which currently fall outside of clear regulatory requirements will be required to be safe before they can be placed on the market, aligning with the minimum standard required for consumer products. This broad outcome-based requirement to assess safety risks, rather than requiring specific standards will ensure that the reformed regime will enable rather than restrict market access for innovative products. A new national regulator for construction products will more effectively and proportionately enforce this reformed regulatory framework, improving the ability to remove non-compliant products from the market and to deter non-compliance. This will help to level the playing field between companies who follow best practice and who comply with the law, and those that try to seek a competitive advantage through non-compliance.

A full copy of this correspondence can be seen here. 

A full summary of the Building Safety Bill written by FIS is available here 

It feels like a full frontal assault on construction from Gove

Stark Warning in Government Response to FIS on Building Safety Blame

Government has made it clear that it is lining up changes to the Defective Premises Act and Section 38 of the Building Act 1984 to ensure the construction sector is “held to account for building safety issues”.  In a letter to FIS, the Department for Levelling Up, Housing and Communities have spelled out that Legislative changes are being designed to “extend legal rights to redress for shoddy workmanship” and facilitate “civil action to be brought regarding breaches of building regulations which have resulted in injury or damage to property”, holding “those responsible for defective construction work can be held to account for their failures.”

This clear warning was issued in a response to an FIS letter sent in early November to Secretary of State, Michael Gove suggesting a new approach to the Building Safety Fund is required.  FIS has isolated issues with the Building Safety Fund since its inception and repeatedly spoken out on concerns related to the retrospective elements of changes to the Defective Premises Act.  The Act is being extended to cover refurbishment works and to alter the limitation period under section 1 of the Defective Premises Act 1972 from six to fifteen years regardless of contracts and warranties – this change will be imposed retrospectively from the moment the Act is passed (expected to be in the Spring or Summer 2022).

In the letter to Mr Gove, FIS recommended drawing parallels with the Pension Protection Fund, an intervention designed to protect individuals in defined pension schemes from company insolvencies.  FIS suggests that this approach could be replicated by raising a levy on costs like Insurance Premium Tax. and would help to prioritise building work over litigation.  It could also facilitate a mechanism to extend the focus of the Fund beyond cladding, supporting a holistic acceleration in improvement in much needed building safety work.  As with the Pension Protection Fund, a centrally co-ordinated approach could also provide an efficient mechanism to deal with isolating culpability retrospectively and in a more consistent and measured way.  FIS expresses concern that the current policy direction is likely to see litigation put in front of action, companies wound up in administration and life critical interventions delayed and the question of who pays unresolved.

Reflecting on the Government response to the FIS letter CEO, Iain McIlwee stated:  “I believe the direction of travel set down in this letter is a real concern to the construction sector and remain convinced that the answer to safer buildings is not the punitive, backward looking approach described.

The Defective Premises Act applied retrospectively in this way is more about winning the blame game than solving problems.  To be clear no-one is advocating that leaseholders should be footing the bill or that, in clear cases of negligence or deliberate attempts to disguise information, companies and individuals should not be held to account.

But we can’t allow history to be re-written and a better Building Safety Fund would give the opportunity to draw a line under the past, whilst at the same time recognising that, from regulation, through guidance, enforcement, design, construction and the asset management and maintenance of buildings there has been a systemic failing in the process required to build and maintain safe buildings.

My concern is that, beyond the gaps and opaque advice around regulatory compliance, unhealthy procurement practices, value engineering and accelerated programmes, failings have been underpinned by inappropriate risk exchange in heavily amended standard and ultimately unfair contracts.  Contracts have been written to drop a disproportionate amount of financial, time and quality risk into the smallest parts of the supply chain, those least able to resist and manage it.  In the interventions described in this letter I don’t see a rapid and effective solution or those morally who should shouldering the blame being held to account.  All I can see is a process that squeezes far more blame than is fair or proportionate onto small and medium sized contractors, manipulated by a failed process, never set up to succeed and now to take the fall.”

A fully copy of the letter follows:

Dear Mr McIlwee,

Thank you for your email dated 9 November to the Rt Hon Michael Gove MP regarding cladding remediation and leaseholder liability. I am responding as an official in the team responsible for building safety.

Thank you for your suggestions. The Government has been clear that building owners and industry should make buildings safe without passing on costs to leaseholders. Where they have not stepped up, the Government has intervened by providing grant funding for the removal of unsafe cladding on all buildings of 18 metres and above in height. The total amount of this grant funding scheme represents a globally unprecedented investment of over £5 billion in building safety which will protect hundreds of thousands of leaseholders from the cost of replacing unsafe cladding on their homes.

However, Government funding does not absolve building owners of their responsibility to ensure their buildings are safe, and they should consider all routes to meet costs, protecting leaseholders where they can – for example, through warranties and recovering costs from contractors for incorrect or poor work.

It is also fundamental that the industry that caused this legacy of unsafe buildings contributes to setting things right. At Autumn Budget 2021 the Government released details of the Residential Property Developer Tax, which will apply a new 4% tax to the largest residential property developers on the profits they make on UK residential property developments. Details of this can be found here

The Government is also introducing a levy on major developers which we expect to be introduced at the Gateway 2 stage of the new Building Safety Regime. On 21 July the Government launched a consultation seeking views on the design of the developer levy, including how it will be calculated. The decision on the levy calculation and rate will be informed by the evidence received from this consultation, and balancing revenue raised with potential impacts on housing supply. The consultation has now closed, and the Government is considering responses. The consultation can be accessed on gov.uk here.

The Government’s approach prioritises action on buildings 18 metres and above because the risk to multiple households is greater when fire spreads in buildings of this height. For buildings lower than 18 metres, advice from independent experts, published on 21 July on gov.uk, is clear that there is no evidence of systemic risk of fire in blocks of flats.

The principle that those responsible for creating building safety defects should pay to put them right has always been the Government’s position. That is why we are taking action through the Building Safety Bill to extend legal rights to redress for shoddy workmanship by retrospectively extending the limitation period under section 1 of the Defective Premises Act 1972 from six to fifteen years.

These changes will enhance the ability of building owners, homeowners and leaseholders to seek compensation from those responsible for defective work. Going forward, we are also expanding the Defective Premises Act to include refurbishment works, and we will be commencing section 38 of the Building Act 1984, allowing civil action to be brought regarding breaches of building regulations which have resulted in injury or damage to property. These measures will ensure that those responsible for defective construction work can be held to account for their failures.

We are also introducing the Residential Property Developers Tax and the Building Safety Levy to make sure that the industry which created these problems pays its share towards resolving them. In addition, we are actively encouraging developers to step up and make direct contributions towards historic defects in buildings for which they are responsible.

Thank you again for your correspondence and I hope that you find this response helpful.

Yours sincerely,
Building Safety Programme
Correspondence Team
Department for Levelling Up, Housing and Communities

A recent SpecFinish Article highlights how the Defective Premises Act may impact the sector

You can find out more about FIS Campaigns and Lobbying work here

 

UK Government Notice to WTO sets down future for Construction Products Regulation

Regulation Update: All new buildings to produce nearly a third less carbon

New buildings in England will have to produce significantly less CO2 under new rules announced by the government to help the country move towards net zero.

Under the new regulations, CO2 emissions from new build homes must be around 30% lower than current standards and emissions from other new buildings, including offices and shops, must be reduced by 27%.

Heating and powering buildings currently makes up 40% of the UK’s total energy use.

Installing low carbon technology, such as solar panels and heat pumps, and using materials in a more energy efficient way to keep in heat will help cut emissions – lowering the cost of energy bills for families and helping deliver the UK’s climate change ambitions.

All new residential buildings, including homes, care homes, student accommodation and children’s homes, must also be designed to reduce overheating, making sure they are fit for the future and protect the most vulnerable people. Improvements to ventilation will also be introduced to support the safety of residents in newly-built homes and to prevent the spread of airborne viruses in new non-residential buildings.

The changes announced today to the government’s Building Regulations, which set the standards in England for the design, construction and alteration of buildings, follow a public consultation and will come into effect from June 2022.

They will raise standards and are an important step towards a cleaner greener built environment, paving the way for the Future Homes and Buildings Standard in 2025, which will mean all future homes are net zero ready and will not need retrofitting.

Housing Minister Eddie Hughes said:

Climate change is the greatest threat we face and we must act to protect our precious planet for future generations.

The government is doing everything it can to deliver net zero and slashing CO2 emissions from homes and buildings is vital to achieving this commitment.

The changes will significantly improve the energy efficiency of the buildings where we live, work and spend our free time and are an important step on our country’s journey towards a cleaner, greener built environment.

The new regulations come alongside £6.6 billion of direct investment into improving the energy efficiency of buildings during this Parliament. The Social Housing Decarbonisation Fund, Local Authority Delivery scheme and Home Upgrade Grant scheme make grants available to low-income households for insulation, solar panels, heat pumps and other efficiency and decarbonisation measures.

Last week, a further £400 million of funding was announced for more than 200 local authority areas as part of a new Sustainable Warmth Competition.

Commenting on the changes, FIS CEO Iain McIlwee stated:

“This is more evidence of the intent of this Government to ensure Net Zero is at the heart of policy making and we are seeing similar in Wales, Scotland and Northern Ireland.  We have seen the headlines before, but this time they are being backed by cold, hard regulation.  To meet the challenges and opportunities this creates we have, in 2022 appointed a Sustainability Champion and have an engaged and active Sustainability Leadership Group.  We will work to keep our members abreast of technology through our magazine SpecFinish and will be running bi-monthly meetings of our sustainability working group next year.  You can keep up-to-date on the sustainability hub on the FIS website.”

Further information

Alongside amendments to the Building Regulations, we have published 5 new Approved Documents:

There will be a 6 month period before the new regulations come into force on 15 June 2022. Transitional arrangements are in place which mean that if a building notice, initial notice, or full plans for building work are submitted to a local authority before 15 June 2022, then provided the building work commences by 15 June 2023, work on that individual building is permitted to continue under the previous standards.

As well as setting out measures for the 2021 uplift to the Building Regulations, the government response to the Future Buildings Standard consultation also sets out plans for the implementation of the Future Buildings Standard from 2025. This includes plans to start a full technical consultation on the FBS in 2025.

You can find more information on sustainability and net zero in the finishes and interiors sector via the FIS Sustainability Hub

FIS responds to HSE issues warnings ahead of Building Safety Bill

FIS responds to HSE issues warnings ahead of Building Safety Bill

As part of work underway to establish a new Building Safety Regulator and reform the building safety system, HSE is urging those who design high-rise buildings to act now to prepare for the changes coming when the Building Safety Bill becomes law.

The Building Safety Bill, currently making its way through Parliament, aims to implement all of the recommendations set out in Dame Judith Hackitt’s “Building a Safer Future” report, and in places goes further. The reforms include a more stringent approach to the design and construction of high-rise buildings, clearer responsibilities on designers to ensure these buildings are safe, and new measures so that everyone doing design or building work is competent to carry out that work in line with building regulations.

People working on the design of a high-rise building, from the development of a planning application through to building regulations approval will need to understand the building’s intended use, correctly identify the risks, and own and manage those risks to determine the safety of a building.

There will be a requirement to record and provide evidence of decision-making during the design process, and a need to be engaged throughout a building project to handover to the end client. Prepare now for these changes.

Peter Baker, Chief Inspector of Buildings at the Health and Safety Executive, said:

“Designers have a strong influence on safety and standards, particularly during the very early planning and design stages of a building project. Their decisions not only affect the safety of those carrying out the building work, but also those maintaining, using, or living in a building after it is built.

“I encourage designers to act now and prepare for the more stringent regulatory regime. HSE will continue to work with the building design industry and related businesses to support them to deliver safe and high-performing buildings and ensure that residents of high-rise buildings are safe, and feel safe, in their homes now and in the future.”

Colin Blatchford, Operational Policy Lead for Gateways and Building Control at HSE, said:

“Everyone involved in the design of high-rise buildings must take a proactive approach to managing building safety from the earliest stages of the design process. These changes are coming. Those involved need to plan ahead through correctly identifying, taking ownership and managing the risks – ensuring key decisions are recorded throughout the process.

“Once the Building Safety Bill becomes law, there will be a requirement for a safety case report when a building is completed and occupied. It is important to consider this at the early design stage for your clients and future residents’ safety.

“Building safety changes are coming and will affect everyone involved in a high-rise building project beyond its design. We urge that you act now.”

Responding to this statement, FIS CEO Iain McIlwee said:

“The Building Safety Bill offers a huge lever for change, but it needs to start with a recognition that design is detailed through the construction process and for the detailing to be effective we need the specialist contractors and manufacturers involved (and contracted) at a far earlier stage.  Even with tighter regs, we will still see problems being resolved on the fly in difficult circumstances and under severe time pressure on site rather than designed out of the process at an earlier stage.  This has to be about changing not just the way we design and build, but vitally how we procure the services, respect specialist knowledge and collaborate far more effectively through the project.”

You can find out more about the implementation of the Building Safety Bill here