According the the latest FIS State of Trade Survey, the finishes and interiors finished 2022 relatively strongly with a net balance of 42% experienced growth in sales (against 17% in Q3) and 50% of those responding to the FIS State of Trade Survey reporting sales volumes increasing by over 5% (up from 33% reporting the same in Q3).
Looking ahead to 2023, again the picture for sales is more positive than in Q3 with those predicting growth swinging from just 20% to 75%. There is, however, an acceptance that some projects will slip and not all will turn into boots on the ground and the overall impact on anticipated workload is that there is a slight downward trend with just 33% predicting growth (versus 45% in Q3).
The majority anticipate static market conditions for the year ahead, with a small swing in terms of those predicting a decline (up to 26% from 25% last quarter) resulting in a net balance predicting growth of 9%. This is slightly less optimistic than in Q4 2021 when a net balance of 18% were predicting an increase in workloads.
This week Kevin Hollinrake MP, Minister for Enterprise, Markets and Small Business Government opened a consultation into Payment Practices and Performance Regulations 2017. The consultation is looking primarily at whether the Regulations should be extended beyond their current expiry date of 6 April 2024. It also provides an opportunity to consult on other potential amendments and improvements to the Regulations resulting from the views expressed by those who responded to the recent statutory review.
The consultation sets out proposals on:
amending the expiry date to extend the Regulations beyond 6 April 2024
including an additional value reporting metric
referencing payment reporting in a company’s director’s report
a clarification of how supply chain finance is reported
including a new metric on disputed invoices
retention payments in the construction sector
FIS fed into the initial review via the Small Business Commissioner and will be responding to the consultation on behalf of our membership.
FIS continues to speak out on poor practice witnessed in construction (see recent article in Construction News – FIS CEO calls out Payment Practices). We will be also be drawing on research recently conducted with the University of Reading that has highlighted “46% of subcontractors reported waiting for 40-59 days in comparison to only 24% of main contractors. Perhaps most strikingly, only 6% of specialist subcontractors reported being paid within 30 days.”
Specifically on retentions the consultation is exploring:
Question 6: Do you agree that the Regulations should be amended so that payment practice and performance reports should include information on the standard retention payment terms in qualifying construction contracts?
Question 7: Do you agree that the Regulations should be amended so that payment practice and performance reports should include statistical information on retention payments?
But, it should open up an opportunity to raise more broadly concerns over retentions and our response will draw on questions raised in the research conducted with the University of Reading.
If you are interested in feeding directly into the consultation, you can access all the information here. Please do send a copy of any response or thoughts that you would like embraced in the FIS response to iainmcilwee@thefis.org. Equally if you want to talk through your views, don’t hesitate to call Iain on 0121 707 0077.
This weekend we heard Rt Hon Michael Gove’s (Secretary of State for Levelling Up, Housing and Communities) candid admission that Building Regulations were “faulty and ambiguous” in the run-up to the Grenfell Tower fire. This was, however, backed up with an assertion that there had been an “active willingness” on the part of developers to endanger lives for profit.
Gove’s mantra remains “polluter pays” and these comments were followed by a letter issued to developers today (30 January 2023) saying that Government expects them to sign a newly published ‘developer remediation contract’ as soon as possible.
Last year, 49 developers signed a public pledge committing to do the right thing to protect leaseholders and residents. Once signed, the contract will make those commitments legally binding., the contract will require developers to:
Take responsibility for all necessary work to address life-critical fire-safety defects arising from design and construction of buildings 11 metres and over in height that they developed or refurbished over the last 30 years in England.
Keep residents in those buildings informed on progress towards meeting this commitment.
Reimburse taxpayers for funding spent on remediating their buildings.
The government has made clear that developers who refuse to sign the contract or fail to comply with its terms face significant consequences.
Commenting on the letter FIS CEO Iain McIlwee stated:
“This letter is a significant moment for construction and, whilst it is positive that the weight has rightly been lifted from the leaseholder, it darkens the shadow that hangs over the construction sector.
The inevitable next step is, for the developers that sign, to start to look to offset their liabilities onto the supply chain. They will engage lawyers to pull out heavily ammended standard form contracts, contracts that even the Government’s own Industrial Strategy recognise “can unfairly transfer legal risk” and that did not reflect the true working practices at the time. Cases like LDC vs GDC vs ESL and Mulallely vs Martley Homes start to give us insight into how this will play out.
The Building Safety Act is undoubtedly a force for long term good, but to truly support transformation in the shorter term it needs to be mirrored by a tightening of the Construction Act and some protection to SMEs in the supply chain. My fear now is that this opens the door to conflict and cost – adversarial behaviours will undermine change and resources that would be better expended on transformation and putting right mistakes of the past will be wasted”.
The Construction Leadership Council issued the latest Product Availability Statement today:
The new year has started in much the same way as the last one finished, with product availability continuing to improve for almost all products and in all regions. This is, in part, due to a reduced level of activity, with poor weather and a delayed return to sites after the Christmas break contributing to a slow start to 2023.
For some, there remains an ongoing problem in relation to gas boilers and M&E products, where the issue is the global supply chain for semi-conductors rather than the UK supply chain.
In some regions, bricks, blocks and roof tiles remain on allocation, but with manufacturers managing deliveries and builders’ merchants adjusting to the situation and carrying extra stock, the majority of end-users are not experiencing shortages. Brick stocks are also increasing, and a new plant will come on stream in 2024.
Price inflation has also stabilised. Timber prices have continued to fall but are expected to increase in Q2 as European mills are reducing production over winter. The price of some energy intensive products, such as bricks, cement and PIR insulation, increased by around 10% in January due to energy and distribution costs. However, with continuing economic uncertainty, some suppliers have deferred price increases, but with general inflation still above 10%, these are likely to be implemented by Q2.
The electro-technical sector is reporting delays for solar products (including inverters, batteries and mounting systems), and also the supply of EV chargers is an increasingly problematic area. Following regulatory changes in December 2022, manufacturers have updated their products or are granted an Enforcement Undertaking by the Office for Product Safety and Standards (OPSS) which allows them to continue to trade while they work towards product compliance. There is a fear that cheap imports which are not compliant with the latest regulations may reach the market. Installers should check the provenance with their wholesalers and request a Statement of Compliance and, if applicable, an Enforcement Undertaking.
Shipping costs from the Far East have vastly improved, with container costs dropping nearly 80% from last year’s high now nearing pre-Covid levels. However, a surge in Covid in China is affecting all points of the supply chains there. These problems are expected to continue through the Chinese New Year, with most factories closing from 16-29 January.
Looking further ahead there is considerable uncertainty forecasting demand for the coming year particularly for domestic RMI work and increasingly for new housing, where higher mortgage rates and the end of the Help to Buy scheme at the end of March are expected to slow new sales. Other areas, however, continue to see strong demand, particularly for industrial, commercial, infrastructure and government projects.
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
Commenting on the statement FIS CEO, Iain McIlwee stated:
“Whilst we are starting to see some hope on the horizon in terms of inflation abating, but we aren’t out of the woods yet. In addition to the problems outlined above, the New Year started in our sector with a new and significant round of price rises for plasterboard and plaster. We need to be careful and realistic in our pricing and continue to work with the supply chain to ensure that this is managed and we don’t just load it onto the specialists who simply cannot just absorb this.”
New Guidance has been published by the Home Office to help conduct routine checks on fire doors and provide information to residents. This guide is aimed at Responsible Persons carrying out simple checks upon a fire door. It is based on the assumption that the fire risk assessment has already assessed the suitability of the fire doors.
This short guide is intended to assist those with duties under the Fire Safety (England) Regulations to comply with regulation 10, which makes requirements about fire doors in all buildings that contain two or more domestic premises and that contain common parts, through which residents would need to evacuate in a fire.
Regulation 10 makes requirements in relation to two matters, namely:
information about flat entrance doors that the Responsible Person must give to all residents (whether tenants or leaseholders) – this requirement relates to all blocks of flats
routine checks of fire doors that the Responsible Person must ensure are carried out – these checks are only required in blocks of flats in which the top storey is more than 11m above ground level (typically, a building of more than four storeys)
FIS is working with No Going Back (NGB), an innovative programme of training, support, employment, and housing funded and driven by 35 Livery Companies working collaboratively to reduce re-offending.
With Employment being such a major part of changing people’s lives when people leave prison, helping to dramatically reduce the likelihood of reoffending, between 23 January – 3 of February 2023, New Futures Network are hosting ‘Unlocking Construction’ employment events in prisons across England & Wales. and NGB are delighted to be a part of this in HMP Onley, Brixton, Wandsworth, and Thamesmead.
HMP Wandsworth and HMP Onley would like to invite Employers from the Construction Industry inside to be part of a special employment event on Wed 25 January (Wandsworth) and Wed 1 February (Onley) to support men into sustainable jobs in the construction sector upon release. This could be men with experience or those who are looking to pursue a new career in the sector. As more than 80% of men released from HMP Onley return to London and the Home Counties, many fantastic potential candidates are keen to find out about jobs on release.
For those attending, the events will follow the format:
HMP Wandsworth – Wednesday 25th January at 1:30 pm (likely finish time 4pm)
An interactive session in the Bounce Back Dry Lining workshop for serving prisoners who are interested in working in Dry Lining – some are currently doing the dry lining training course, and others have completed it.
This event is to improve their awareness of, and access to information on further training and employment opportunities available by introducing them directly to specialists and employers in the sector. It would give the men a chance to raise any questions to address challenges or concerns relating to employment or training within the sector. The prison will also pre-select a couple of men who are work-ready and approaching release for employers to speak with individually.
HMP Onley – Wednesday 1st February at 8:30 am (likely finish time is 4pm)POSTPONED DUE TO RAIL STRIKE, BUT IF YOU WANT TO BE KEPT UP-TO-DATE ON THE REVISED DATE, USE THE CONTACT LINKS BELOW
HMP Onley are hosting a Construction Fair on the day, with a cross-section of employers from the industry to support men into sustainable employment upon release. This could be men with experience or those who are new and looking to pursue a career in construction.
They are running a morning and afternoon session to allow more prisoners to take part and fit around the prison regime. More than 80% of men released from HMP Onley return to London and the Home Counties, there are many fantastic potential candidates who are keen to find out about jobs on release. For employers attending, there would also be an opportunity to have a prison tour to visit the Industry Workshops and recently launched Employment Hub. Training programmes running in this facility include Dry Lining, Carpentry and Joinery and Flooring.
NGB are also happy to facilitate visits in other prisons.
If you are interested in attendng one of these prison visits or finding out more about opportunities to engage in a programme in your local area (or arranging a seperate arrangement for these two facilities), please email jokeane@bouncebackproject.com asap (copy beenanana@thefis.org) or call the FIS on 0121 707 0077.
FIS has supported CICV (a collaborative construction trade body in Scotland) in developing a new major new survey to help establish an overview of the current state of payments and cashflow in the Scottish construction industry.
Commenting on the survey, FIS CEO Iain McIlwee stated:
“This is another important piece of work that the CICV is doing and it is great to see a genuine focus on collaboration across the wider sector once more being emodied through this group. With the Government’s Payment review announced, we need to be honest about where we are as an industry – this is something we at FIS will really be stepping up the ante on this year. Getting to the real data will help spotlight real concerns and instruct how legislation (and behaviours) need to change. Poor payment practices and process management around payment are a cancer at the core of construction. Please share your data so together we can drive change.”
FIS encourage anyone who works in construction to take part in the survey, which closes on 27 January and can be accessed here.
The case of LDC (PORTFOLIO ONE) LIMITED vs (1) GEORGE DOWNING CONSTRUCTION LIMITED (GDC) EUROPEAN SHEETING LIMITED (ESL). Starts to give fresh insights into how claims will be heard in the new compliance landscape.
The case related to external wall works carried out by ESL under a sub contract to GMD Developments Ltd (the main contractor). Both contractors were retained on a design and build basis and both issued collateral Deeds of Warranty dated 17 October 2008 in favour of the then employer, GMD. Those Deeds of Warranty were subsequently assigned by GMD to LDC (the employer).
The works related to three blocks, each over 18m high, and each with a different configuration of external wall cladding. In each case, on the inside of the external wall cladding there is a breather membrane and Structural Insulated Panels (“SIPs”). The SIPs were fixed to the structural concrete frame of each block. The case is built on the fact that that following water ingress issues and subsequent investigations into the as-built Property, it was discovered that:
There are several defects in the external wall construction of the composite cladding elevations which have led to water ingress and deterioration of the SIPs.
There are fire barrier and fire stopping issues on all elevations; including in relation to the cavity barrier provision between the outer face of the SIPs and the rear face of the cladding panels on the Cor-ten elevations, and between the rear of the SIPs and the concrete slab and between SIPs, on all elevations.
Other material factors were that GMD had already agreed to a settlement of £17,650,000 with LDC, so the judgement being sought was related to LDC’s claim against ESL in the sum of £21,152,198.87 calculated as follows:
Cost of remedial works: £16,457,825.87; and
Loss of Income: £4,694,373.00; and
Downing’s claim for an indemnity and/or contribution against ESL in the sum of£17,650,000 together with Downing’s reasonable costs of defending the claim brought against it by LDC
The Judge found in favour of the Claimant and ESL were required to meet the full costs. The case raises a number of issues.
The first is that it was heard despite the fact ESL are currently in Liquidation. This means that any liability is likely to be met via a Professional Indemnity claim against the collateral warranty. What is not clear is whether cover is commensurate with the claim or whether any subsequent claim could be brought against duty holders associated with ESL to meet any shortfall. The judgement itself is silent on this, but new legal precedence has been created by the Building Liability Order is yet to be tested. On this aspect, this may not be the last we hear from this case.
The second is that it was 15 years ago – remember the Defective Premises Act now allows retrospective claims to go back 30 years (reverting to 15 years on jobs that started after the Building Safety Act was introduced in 2022).
Another important point is that the case rests not on whether the cladding needed to be removed due to the original selection of the SIPS system (it was replaced with SFS), but to address moisture ingress creating structural issues and uncovering fire safety concerns during investigation. Consequently this judgment makes no reference to initial manufacturer claims. Worth dwelling on is that whilst, for the purposes of remediation a new cladding system was selected and the judgment made reference to “post-Grenfell enhanced Regulation”, the premise of the case is that the works themselves fell short of the requirements due to moisture ingress creating structural concerns and residual fire safety concerns related to changes to the specification during the construction process. In her findings the Judge, Ms Buehrlen KV, concurred that it was more cost effective to replace the entire system and SFS was a better alternative in the wake of new guidance. The comments from Technical Witness Mr Fung are interesting in the reference whether the need to replace was proportionate, but the defence seemed to rest on the fact that any remedial encapsulation would not represent a tested solution. The whole case doesn’t really get into the original specification and whether the potential would be a need to replace regardless due to new cladding legislation. It is what we don’t know here that stands out here.
Another and perhaps the most significant aspect of the case is that a design change was pivotal to the judgement and attempts to caveat changes by ESL were not accepted. This judgement centred on design detailing (i.e. missing verticle fire breaks and EPSM Membrane based on the original Architectural Specification) and workmanship (i.e. missing fixings and issues with the horizontal fire breaks) associated with the original cladding specification. Failings and subsequent damage caused by water ingress to the original cladding system meant it was deemed to be structurally unsound and there were concerns about the fire safety raised.
ESL claim that they were instructed to omit the vertical cavity barriers and EPDM included in the Architectural Specification. We are not party to where, how and why the decision was made around removing fire breaks, but ESL did as a result of the claim that they were “instructed to omit” attempt to exclude the provision of fire breaks from their contractual responsibility. The judgement refers to emails and ESL in their original defence maintained that they were not responsible for the design of cavity barriers and they were instructed to omit the EPDM which caused or contributed to the water ingress issues. Much we don’t know, but if there was pressure put on them to value engineer, a buildability issue was uncovered or whether any external advice was provided, it was not recorded and presented in a manner that convinced the judge that ESL were not ultimately responsible. The Judge determined that these elements were intrinsic to the “design of the cladding and rainscreen” to deliver compliance and so regardless of the attempt to exclude and ESL was left with the liability. The balance between these elements and workmanship issues was not discussed.
In conclusion the judge references the details from the Mulalley case in so far as “Building Regulation Compliance” falls under “Reasonable Skill and Care” in design and meetiing “All Statutory Requirements” in the case of the D&B Sub Contract. The judge determined that the attempts to caveat elements of the design doesn’t supersede a contractual obligation to meet “All Statutory Requirements”. It is unclear to me in the judgement how or why these decisions were reached.
Whilst the full implications of this judgement are yet to be determined, it does throw up some concerns for sub-contractors both in terms of the potential for legacy claims, underpins the need to ensure any change to the specification is appropriately signed off and to exercise caution in terms of the assumption that an express caveat releases a party from their core contractual requirements.
This article was prepared by Iain McIlwee and provided in good faith based on initial reading, FIS Lawyers will be looking in more detail at the full implications of this case and potential precedent set.
The government announces the new “Energy Bills Discount Scheme” for UK businesses, charities, and the public sector from April.
Scheme will provide a discount on high energy costs to give businesses certainty while limiting taxpayers’ exposure to volatile energy markets
Businesses in sectors with particularly high levels of energy use and trade intensity will receive a higher level of support.
A new energy scheme for businesses, charities, and the public sector has been confirmed today (9th January), ahead of the current scheme ending in March. The new scheme will mean all eligible UK businesses and other non-domestic energy users will receive a discount on high energy bills until 31 March 2024.
This will help businesses locked into contracts signed before recent substantial falls in the wholesale price manage their costs and provide others with reassurance against the risk of prices rising again.
The government provided an unprecedented package of support for non-domestic users through this winter, worth £18 billion per the figures certified by the OBR at the Autumn Statement. This is equivalent to the cost of an increase of around three pence on people’s income tax.
The government has been clear that such levels of this support, unprecedented in its nature and huge scale, were time-limited and intended as a bridge to allow businesses to adapt. The latest data shows wholesale gas prices have now fallen to levels just before Putin’s invasion of Ukraine and have almost halved since the current scheme was announced.
The new scheme therefore strikes a balance between supporting businesses over the next 12 months and limiting taxpayer’s exposure to volatile energy markets, with a cap set at £5.5 billion. This provides long term certainty for businesses and reflects how the scale of the challenge has changed since September last year.
The Chancellor of the Exchequer, Jeremy Hunt, said:
My top priority is tackling the rising cost of living – something that both families and businesses are struggling with. That means taking difficult decisions to bring down inflation while giving as much support to families and business as we are able.
Wholesale energy prices are falling and have now gone back to levels just before Putin’s invasion of Ukraine. But to provide reassurance against the risk of prices rising again we are launching the new Energy Bills Discount Scheme, giving businesses the certainty they need to plan ahead.
Even though prices are falling, I am concerned this is not being passed on to businesses, so I’ve written to Ofgem asking for an update on whether further action is action is needed to make sure the market is working for businesses.
From 1 April 2023 to 31 March 2024, eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill, except for those benefitting from lower energy prices.
A substantially higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive – predominately manufacturing industries. A long standing category associated with higher energy usage; these firms are often less able to pass through cost to their customers due to international competition. Businesses in scope will receive a gas and electricity bill discount based on a supported price which will be capped by a maximum unit discount of £40.0/MWh for gas and £89.1/MWh for electricity.
Energy Bill Discount Scheme summary
For eligible non-domestic customers who have a contract with a licensed energy supplier, the government is announcing the following support:
From 1 April 2023 to 31 March 2024, all eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill.
This will be subject to a wholesale price threshold, set with reference to the support provided for domestic consumers, of £107/MWh for gas and £302/MWh for electricity. This means that businesses experiencing energy costs below this level will not receive support.
Customers do not need to apply for their discount. As with the current scheme, suppliers will automatically apply reductions to the bills of all eligible non-domestic customers.
For eligible Energy and Trade Intensive Industries, the government is announcing:
These businesses will receive a discount reflecting the difference between a price threshold and the relevant wholesale price.
The price threshold for the scheme will be £99/MWh for gas and £185/MWh for electricity.
This discount will only apply to 70% of energy volumes and will be subject to a ‘maximum discount’ of £40.0/MWh for gas and
Included in the list of energy intensive industries are:
Manufacture of veneer sheets and wood-based panels
Manufacture of assembled parquet floors
Manufacture of plastics in primary forms
Manufacture of builders’ ware of plastic
Manufacture of lime and plaster
Manufacture of plaster products for construction purposes
Manufacture of tubes, pipes, hollow profiles and related fittings, of steel
Cold rolling of narrow strip
A full list of Energy Intensive Industries is available here. If you feel your operations should be on this list and are not, please contact the FIS on iainmcilwee@thefis.org and will will pick this up with the relevant Government contacts.
Businesses in England will also benefit from support with their business rates bills worth £13.6 billion over the next five years, a UK-wide £2.4 billion fuel duty cut, a six month extension to the alcohol duty freeze and businesses with profits below £250,000 will be protected from the full corporation rate rise, with those making less than £50,000 – the vast majority of UK companies – not facing any corporation tax increase at all.
FIS CEO Iain McIlwee has called out payment practices in the construction sector in a hard hitting article in Construction News this week.
In the article Iain raises the concern that payment conditions are worsening (reported by 21% of FIS Members), with particular issues occurring at the year end. He points out that, whilst average invoice payment times of main contractors with a Duty to Report are reportedly down to 31 days, this masks what is actually happening the ground and the myriad of issues associated with payment applications, pay less notices, certification and underpaying which are picked up in reporting.
A contributing FIS Member who wished to remain anonymous added:
“I am sick to death of begging for money. It isn’t just Christmas. It goes on all year, but definitely gets worse as we move to reporting periods. I attend meetings all the time where I am told businesses pride themselves in paying on time, but it is the spurious underpayments and unsubstantiated pay less notices that they don’t talk about. It feels like death by a thousand cuts.”.
The full article, which you can read here provides first hand accounts of the way in which contractors are being treated and reflects on the impact on relationships and mental health in the sector as well as wasted time and limiting ability to invest and transform. Further experiences have been shared in online discussions linked back to the article.
“I am very concerned about the level of issues we are encountering relating to payment. The industry needs to improve its management of the commercial side of contracts, and this should help greatly to reduce some of the current problems. Project bank accounts will help, as will utilising the Conflict Avoidance Process (CAP). I think the public sector needs to lead by example and take far greater interest in ensuring that payment is getting to the supply chain at the right time and in the right amounts. A shaking of the head and saying, ‘this is nothing to do with us’, does not help the industry.”
FIS, as part of our transformation agenda has committed to stepping up the work they are doing on fair payment in 2023 now that Business Secretary Grant Shapps has announced a formal review into payment practices of larger companies and the impact on the supply chain.
In updated Guidance Published on 9 December 2022, Government has advised that until 30 June 2025, products can continue to be supplied to the GB market without any need for reassessment or re-marking if EU requirements are met (including CE marking). To affix a CE mark, any third-party conformity assessment must continue to be carried out by an EU recognised notified body during this time. In addition, products that meet NI rules (including CE marking or CE UK(NI) marking) can be supplied to the GB market. Businesses should prepare for these provisions to end on 30 June 2025.
This mirrors delays in other product areas announced earlier in the year. In a call to the Constructio Products Association and other industry colleagues, the government explained its intention to use the next 2.5 years to engage widely and scope out meaningful, sensible reform and transition plans.
The FIS, through CPA will continue liaising closely with government to monitor and review the issues at hand, identify the problems for industry and government, and ensure that industry can work with the policies put forward.
FIS Members have been invited to attend the Meet the Bidder event hosted jointly by the Civil Engineering Contractors Association (CECA) and HS2. Tier 1 contractors Taylor Woodrow and Gulermark are seeking to engage their supply chains for HS2’s development at Washwood Heath, Birmingham. This event will offer the chance to understand the opportunities available and for those attending to have 1-2-1 meetings with the short-listed tenderers.
The event will take place on the 7th December 10am – 1pm and will be hosted on MS Teams.
The buyers for this session are seeking bidders in the following areas:
Whilst uncertainty has dominated headlines, workloads in the finishes and interiors sector held up well in the quarter. The picture is more mixed when we look to sales, with the balance experiencing growth reducing from 29% to 17% (when comparing to the last survey period) and those experiencing a decline increasing from a fifth to a third of respondents.
Against a backdrop of uncertanty, looking ahead to 2023, those predicting growth in sales are in the minority (just a fifth of responses). Those seeing the market as static or declining are equally split leaving an overall balance of 20% anticipating a reduction in sales. Again the picture for workload is more optimistic with sales from 2022 washing through and a balance of 19% still anticipating growth. Concerns were experessed about the sub-contractor squeeze as tender price increases do not fully reflect the significant increase in operating costs.
Uncertainty is casting doubt on the viability of some future projects with nervousness amongst investors linked to political and economic uncertainty. It is therefore not surprising to see demand move ahead of labour shortages as the biggest expected constraint for the marke, however, commentry still flags the “alarming lack of quality and reliable labour”.
This week FIS submitted our response to the consultation on implementing the new building control regime for higher-risk buildings and wider changes to the building regulations for all buildings. The consultation was split into 12 consultation sections relate to the proposed changes to Building Regulations under Part Three of the Building Safety Act 2022. It starts to give greater insight into how the Building Safety Regulator intends to manage the Building Control Process for Higher Risk Buildings alongside the wider Building Regulatory Process, where the two will align, the additional informaton requirements for Higher Risk Buildings and provide a bit more context in terms of Gateways, Competence, Compliance and Enforcement.
The key areas covered were:
New dutyholder and competence requirements on all building work and additional duties for those working on higher-risk buildings. These new roles and requirements aim to ensure a stronger focus on compliance with the regulations
A series of robust hard stops (“gateway points”) to strengthen regulatory oversight before a higher-risk building is occupied
The approach to Regulator’s notices to support building projects which comprise both higher-risk building work and non-higher risk building work
Stronger change control during the construction of higher-risk buildings
Additional requirements for building work carried out in existing higher-risk building work e.g. refurbishments
The process of certifying building work that have been carried out without building regulations approval (regularisation)
Establishing greater record keeping and management in higher-risk buildings (golden thread of information)
A mandatory occurrence reporting system in higher-risk buildings
More rigorous enforcement powers for building work in all buildings to focus incentives on the creation of reliably safe buildings from the outset and the approach taken to the review and appeal of building control decisions
Wider changes to the building regulations to align the existing system with the new system
The transitional provisions for changing to the new higher-risk building regime
FIS responded to 11 of the 12 consultation areas. In the response FIS raised concerns about some of the timings associated with the Building Control Approval Process and particularly the impact of decision times in the hard-stop gateways. The FIS also called for support from Government to ensure consideration as to how this will be managed in the standard form contracts, particularly in the initial periods as the process develops and becomes more efficient. The FIS also noted that the Regulator needs to be prepared to provide quick and clear determination of issues and agile guidance is required to support the transition period.
FIS repeated throughout the response that procurement needs to change and there should be checks and balances through the supply chain to assess the practicality of delivery and ensuring that time and resources is available.
FIS was supportive of Mandatory Reporting requirements, but noted the importance of clarity and potentially the need for anonymity in the process. The organisation also some concerns around proportionality related to historic prosections and impact on future supply chains.
The final note of caution was around competence and the need to manage the transition to the new era of proving competence as the infrastructure to support evolves.
Commenting on the consultation FIS CEO Iain McIlwee stated:
“Reading through this gives real insight into how much the construction process is going to change and how much resources is going to be required to support it. This is not just about High Rise Buildings, but in this consultation we see profound change to the entire process and findings from our research into procurement and tender processes were very relevant – this is more about setting up than signing off. The direction of travel is something we can applaud and we agreed with the vast majority of the statements in the consultation, where we have advised caution is largely around ensuring that we don’t tie ourselves in buerecratic knots and we deliver a streamlined compliance regime that is resourced to enforce – at the end of the day good legislation with bad enforcement is perhaps the worst of all worlds. We have also emphasised in the transition period the regulators are going to need to work closely with the industry – the delays could criple companies and guidance needs to be agile as it is a complex process and the early guidance will be tested. We don’t want to be stepping over the bodies of those that were first to the breach as we step forward into a better lanscape for construction!”
If you wish to see a full copy of the FIS Consultation response, email iainmcilwee@thefis.org.uk
Last week, FIS Technical Director, Joe Cilia joined representatives of the CPA to discuss a new white paper on new requirements for competence in the construction products sector.
The White Paper outlines proposals for a standard to unite everyone who uses or works with construction products under a single consistent way of defining construction product competence. It will apply to all the built environment sector, so this is one of a series of webinars for the different industries and this webinar is particularly aimed for manufacturers of construction products..
The panel discussed various topics ranging from implementation to how the white paper will take a coordinated approach for the built environment to unite behind this standard.
You can download your copy of the white paper here.
It is still clearly early days into the chaos in the financial markets following the Chancellor’s ‘Mini Budget’. The CPA Summer forecasts certainly didn’t have banks stopping lending for mortgages (40% of all mortgage products had been withdrawn as of Thursday morning) or the Bank of England having to do £65 billion of Quantitative Easing otherwise all pension providers becoming insolvent on our list of key risks. However, there are some impacts for UK construction that we can identify.
The depreciation in Sterling will lead to further increases in construction materials inflation. It’s worth keeping in mind that construction materials prices in July 2022 were already 24% higher than a year earlier and 46% higher than in January 2020, pre-pandemic. Sterling has depreciated 12% against the Dollar since the end of July. This will exacerbate cost inflation as depreciations in Sterling increase the price of imports.
Cognisant of the need for a collaborative effort in this sensitive period and also that many businesses are already under intense pressure, FIS is urging all to consider the principles of the Conflict Avoidance Pledge. As part of this, members should consider the contractual position and the potential for a Force Majeure event if the contract has that ground of relief in it. Consideration should be given to contacting your “employer” for an “employer instruction”, which would help to clarify the situation with respect to the time and money associated with any stand-down and help avoid potential disputes in the future.
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
A slight slowing of the market over the summer holiday months has resulted in product availability broadly improving. Some issues remain, with extended lead times continuing for aircrete blocks, bricks, gas boilers and various items containing semi-conductors and other electronics.
Price inflation remains the biggest issue for the entire industry and further significant increases in inflation are anticipated due to energy, raw material and labour cost rises.
We also note that although the UK Government’s recent announcement of a six-month energy price cap for business users will help manufacturers here to some degree, the risks around supply and cost of energy threaten manufacturing throughout the EU. While EU policy-makers wrestle with their own solutions, the possibility of factory shutdowns on the continent may lead to shortages of products, materials and components exported to the UK.
The root cause of the problem affecting smart meters, electrics, white goods and gas boilers is set to continue into 2023 as sub-component manufacturers struggle to secure supplies of semi-conductors and electronic components in a highly competitive market. Electrical component shortages are similarly affecting manufacturers in the wider electrical sector, likely to lead to reduced availability and increased prices.
Lead times for most roof tiles are improving. Separately, we are concerned to hear increasing reports of ungraded and poor battens being stamped as standard. Contractors are warned to ensure that correct battens are being used.
High demand for bricks, particularly for new housing, continued over the summer and led to reduced stock levels. This pattern is expected to continue in September, but manufacturers are delivering to agreed schedules with customers. Energy price hikes present a further challenge to both domestic and imported bricks, although Government support may ameliorate this issue for UK manufacturers. Aircrete supply has been compounded by a production issue at one of a major manufacturer’s sites, which meant deliveries were reduced in August.
Uncertainty around energy supply in Europe could also impact raw materials for paints and coatings, which are already affected by raw material shortages. Medium-term, there is a need to amend the UK REACH registration process to ensure chemical registration is not made so difficult and expensive that UK manufacturing loses access to key substances for products.
Overall steel supply has improved, but the EU has completely filled their quotas from non-EU countries, including the UK. Heavy sections cannot be transported from the UK mainland to Northern Ireland without incurring tariffs.
Rising energy costs are likely to affect timber prices as we move into Q4 and Q1 2023. There are good stocks on the ground of both structural softwood and wood based panels, but stocks at ports are much lower and buyers will need to consider forward purchases to ensure the specifications they require are available through to year end and into 2023. Price pressure eased considerably over the summer but log prices remain firm as demand for pulp and paper, pallets and fuel wood is currently very strong throughout Europe. With energy costs rising, forward replacement prices for structural softwood are unlikely to be at current UK levels.
The effect of high inflation and softening demand has seen shipping output and punctuality improve, and costs for some key UK routes down by a third since the beginning of the year. It is too early to gauge the impact on the construction sector of industrial action at Felixstowe, but we know that some businesses are suffering logistical headaches and added costs owing to re-directed deliveries. This Group will also monitor the two-week strike planned for 19 September at Liverpool’s port, Britain’s fourth largest.
Finally, we are saddened to note that the year to June recorded the highest annual level of insolvencies amongst UK construction firms since the financial crisis over 10 years ago, despite strong demand throughout the first half of the year. The key risk going forward, given the substantive rise in insolvencies, is to what extent sharp cost rises and slowing demand over the next six months will exacerbate the rise in insolvencies.
All at FIS are saddened by the loss of our Queen and join our community and nation in mourning, but also express our gratitude for her unwaivering period of public service. We send our deepest condolences to her family in their time of mourning.
The Government is currently working with the Royal Household on how to commemorate the life of Her Majesty, and further guidance will be available in coming days.
At present businesses across the UK should continue to operate normally but there are some considerations you may wish to make, including:
providing an opportunity for your staff to offer their condolences, either by providing your own book of condolence or by directing them to the online book of condolence at the Royal website;
identifying arrangements made by Local Authorities to lay floral or memorial tributes;
signposting staff on how to donate to one of The Queen’s patronages, with information available on the Royal website;
identifying whether your business location is likely to be impacted by arrangements made by Local Authorities, or events planned in central London, and planning your response;
considering any changes you might wish to make to your website and social media activities; and
where you have flags, lowering them to half mast.
The Royal Household will be the primary source of information on mourning arrangements, and will set out arrangements on Lying-in-State and the State Funeral. Businesses are encouraged to follow updates on www.gov.uk and the Royal Website.
Your Local Authority will also be updating their own websites on local arrangements, including any events they may organise which might impact on the locality of your business or local travel. Members working in London will need to consider carefully the impact on logistics in London in the wake of increased visitors and possible road closures. We are aware that the CLC are in contract with TFL to ensure any major issues are addressed and communictaed.
The Act provides a framework for change and Government is now consulting on how elements of wider regulation need to change and principles set down within the Act that will be brought through in secondary legislation.
A portal is now open looking at policy proposals for legislation government intend to introduce to create the building control procedure for higher-risk buildings, as well as wider changes proposed to improve the building control system overall.
They are seeking now views on:
New duty holder and competence requirements on all building work and additional duties for those working on higher-risk buildings. These new roles and requirements aim to ensure a stronger focus on compliance with the regulations
A series of robust hard stops (“gateway points”) to strengthen regulatory oversight before a higher-risk building is occupied
The approach to Regulator’s notices to support building projects which comprise both higher-risk building work and non-higher risk building work
Stronger change control during the construction of higher-risk buildings
Additional requirements for building work carried out in existing higher-risk building work e.g. refurbishments
The process of certifying building work that have been carried out without building regulations approval (regularisation)
Establishing greater record keeping and management in higher-risk buildings (golden thread of information – and a key consideration as to how accoutability and responsibility are managed)
A mandatory occurrence reporting system in higher-risk buildings
Wider changes to the building regulations to help align the existing system with the new system
More rigorous enforcement powers for building work in all buildings to focus incentives on the creation of reliably safe buildings from the outset and the approach taken to the review and appeal of building control decisions
The transitional provisions for changing to the new higher-risk building regime
The impact on the wider Building Regulations and Building Control Process
As part of this work there is a focus on aligning changes and requirements of higher risk buildings with wider changes to the building regulations – this is consistent with concerns raised through the development of the Act that highlighted concerns over the complexity of a two tier system of Buildinig Control and that Building Control Authorities will now be regulated through the HSE.
Aspects of this includes recommendation of a more onerous application that, instead of depositing full plans, applicants intending to carry out building work on a building that is not a higher-risk building will need to submit a building control approval application with full plans to the local authority prior to commencing building work. The building control approval application will be required to demonstrate how the proposed building work complies with all applicable building regulations’ requirements. It is likely to lead to greater detailing requirements related to functional requirements of the regulations.
It is also notable that demonstration of competence requirements and demonstration of competence will be under closer scrutiny through the new process for all aspects of the Building Regulations and more consistet with the concepts of accountabilty and dutyholders outlined in the Act as well as a press for greater collaboration, with the inclusion of statements such as:
We propose that the following duties will apply to all dutyholders during design and construction, they must:
Plan, manage and monitor their work to ensure the building work complies with building regulations;
Cooperate with other dutyholders (e.g. share information, have effective routes of communication, and support other dutyholders in achieving compliance with the regulatory requirements imposed by the new regime for higher-risk buildings, including meeting gateway two and three, golden thread and mandatory occurrence reporting requirements); and
Ensure they and the people they appoint are competent (have the necessary skills, knowledge, experience and behaviours and where organisations are involved, the appropriate organisational capability) to carry out design work and building work they are engaged to do and only undertake work within the limits of that competence.
These dutyholders will be aligned to the those in the Construction (Design and Management) Regulations 2015 (CDM).
There are also some interesting aspects related to the Golden Thread that may be complex to manage in the context of start/stop Gateways:
It is expected that the design and construction phases will overlap and influence each other, rather than run consecutively. The Principal Designer should be responsible for updating and managing the golden thread during the design phase. We propose that they will be specifically responsible for:
Creating and developing the golden thread (although initial information about the building may be provided by the client) and managing and updating this throughout the design phase;
Finalising the golden thread and handing it over to the Principal Contractor on completion of the design phase;
Collaborating with the Principal Contractor to ensure any design work done during the construction phase is captured in the golden thread;
Ensuring that the golden thread meets the required standards/principles; and,
Cooperating and sharing information with the Principal Contractor as necessary.
Consultation is also taking place on concerning the in-occupation regime for occupied higher-risk buildings, whilst most of this is not on the surface directly relevant to the construction process and FIS members, it does include some important information related to O&M Manuals and the requirements of the Golden Thread. The CPA has prepared an excellent summary that FIS Members Can Download here
Next Steps
The consultation deadline is the 12th October.
Full details of the consultation are available here – please consider responding directly, but also sending any specific comments through to FIS on iainmcilwee@thefis.org.uk that we can build in to any required sectoral response.
Aspects of this consultation will be discussed at the upcoming FIS Working Group Meetings – see details of times and locations here. The FIS will be feeding in our views and working closely directly with the Department and with Construction Products Association and the Construction Leadershp Council to ensue that the industry is seeking concesnus and is aligned and collaborating when we focus on compliance.
