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.
Minister for Refugees Lord Harrington has written to businesses confirming that Ukrainian and Afghan nationals have a right to work in the UK where they have resettled under the Ukraine Family Scheme, Homes for Ukraine Scheme, Afghan Relocations and Assistance Policy or Afghan Citizens Resettlement Scheme. Although the exact process will be determined by how the individual arrived in the UK, employers should conduct right to work checks in the usual manner and contact the Home Office Employer Checking Service (ECS) if further verification if required.
In his letter the Minister re-iterates that all employers in the UK have a responsibility to conduct simple right to work checks before employing someone. These checks are required regardless of nationality – even British citizens are caught by the measures.
Afghan nationals who have resettled in the UK under the Afghan Relocations and Assistance Policy or the Afghan Citizens Resettlement Scheme, and Ukraine nationals who have resettled in the UK under the Ukraine Family and Homes for Ukraine Schemes have a right to work. To evidence that right, employers should conduct right to work checks in the usual way.
For Ukraine nationals, the exact process required of the employer is shaped by how the individual arrived in the UK and the documentation held. But, broadly speaking, at the time of writing:
Where an individual has a stamp in their passport which provides a time-limited right to work, the employer will need to manually check the passport as set out in published guidance, and perform a follow-up check to ensure the required documentation to evidence the right to work for a longer period (i.e. a Biometric Residence Permit) has been obtained;
Where an individual has an eVisa (digital evidence of their immigration status, accessible online), the employer should use the online right to work checking service on GOV.UK in the same way as they would for others in possession of a biometric card; and
Where an individual does not have a passport but instead has an Entry Clearance vignette attached to a ‘Form for Affixing the Visa’ (FAV), where necessary this document can be used as proof of right to work in conjunction with confirmation from the Home Office Employer Checking Service (ECS) in the form of a PositiveVerification Notice (PVN). However, in most cases, shortly after arrival a BiometricResidence Permit is available for collection, and this should be used to access the online checking service.
The temporary changes to right to work checks introduced in response to COVID‐19, which allow employers to undertake checks via video calls and use scanned copies rather than original documents, are due to end on 30 September 2022. After this date, employers are recommended to verify an individual’s right to work using a certified digital identity service provider (IDSP).
The market has remained bouyant in Q2 2022 with 54% of respondents reporting growth – this is a similar number to reporting same in Q1 2022, but with the vast majority now seeing sales growth in excess of 5%. This is positive, but there has also been an upturn in the number of companies reporting declines of over 5%, up from 15 to 21%, underpinning that the market remains volitile.
The annualised picture also shows that, in terms of volume, the market has been pretty strong, with just 7% of businesses indicating that workload has actually decreased by over 5%. Again anticipated sales are, on the whole, optimistic, with a 67% (down from 75% in the last survey) anticipating growth in sales and 59% reporting an increase in workload in the year ahead (down from 62%).
The key risks to the sector are identified as:
A prolonged war in Ukraine leads to material availability issues and continued inflation
Inflation impacts viability of planned and future projects
Inflation drives aggressive tendering – squeezes margin and impacts viability of businesses, particularly where fixed term prices are imposed unsympathetically.
Inward Investment becomes less attractive as companies consider the impact of potential future sanctions in the UK.
More ethical scrutiny of investors starts to impact sources of inward investment.
Prolongued Labour Shortages constrain growth
Retrospective elements of the Building Safety Bill create a blame culture that in turn leads to higher business failure rates and availability of insurance
The Building Safety Act passed into Law in April 2022 and it brings into being a new Regulator – The Building Safety Regulator will help to deliver the two underlying objectives of the Act, namely securing the safety of people in and around buildings in relation to risks from buildings and improving building standards.
Contrary to popular belief, the The Building Safety Regulator has a wider remit than High Rise High Risk Buildings and is tasked to:
implement a new, more stringent regulatory regime for high-rise buildings in England
being the building control authority in England for building work on high-rise buildings
overseeing and enforcing the new regime in occupation of high-rise buildings
oversee the safety and performance of all buildings. This has two aspects:
overseeing the performance of other building control bodies (local authorities and registered building control approvers (currently known as approved inspectors))
understanding and advising on existing and emerging building standards and safety risks
promote competence among industry professionals and regulators to raise standards in the design, construction, and management of buildings
The Regulator will be part of the Health and Safety Executive (HSE) and so the mechanisms and enforcement approach will be familiar to the construction sector already immersed in compliance with CDM.
In a new Factsheet the Building Safety Regulator starts to outline how they imagine this will work in practice, starting with the clear principle (akin to that in CDM) that the person or entity that creates, or is responsible for, a building safety risk should be responsible for preventing, managing, and controlling that risk. This includes building designers, who have a responsibility to design a building that complies with relevant building regulations.
Regulatory intervention will be targeted on activities where there is high actual or potential harm arising from any breach. In judging how far dutyholders have taken steps to reduce or mitigate safety risks, the Building Safety Regulator will balance the degree of risk against the money, time or trouble needed to avert that risk in the particular circumstances, as well as the impact of any action on businesses and residents.
The Building Safety Regulator will expect that dutyholders, in turn, will adopt a sensible and proportionate approach to managing safety, focusing on significant risks.
It is intended that the Building Safety Regulator will employ a variety of methods to encourage and support dutyholders to meet the requirements of relevant Building Regulations and to manage fire and structural risks in buildings in a sensible and proportionate way. This reflects the aims in chapter 8 of the document: A reformed building safety regulatory system: government response to the Building a Safer Future consultation, published by MHCLG in April 2020.
The appropriate and proportionate use of enforcement powers, regulatory tools, and sanctions by the Building Safety Regulator will be set out in a published Enforcement Policy Statement (EPS) in due course.
For further information about the Building Safety Act, including an outline summary of what it all means to the finishes and interiors sector, click here
Against the backdrop of ongoing volatility, we today received the latest update from the CLC Product Availability Committee. From an availability perspective the overall tone is positive. The specific challenges in Northern Ireland aside and despite ongoing reports of chaos at the Ports, the decision to delay the latest round of post-Brexit customs checks means that general product availability continues to improve across virtually all categories.
The Statement also identifies that inflation associated primarily with the ongoing conflict in Ukraine appears to have stabilised, with softening demand, particularly in the retail end of the market contributing. The underlying conditions remain concerning, however, with many UK manufacturers purchase energy on forward contracts to help manage risk. The current extreme price volatility means that some firms are experiencing electricity cost fluctuating by up to 300% on a day-to-day basis, which may affect the financial viability of some energy-intensive manufacturing particularly during the winter months.
One area for FIS Members to be wary is glass. There are fresh concerns over the availability and cost of imported glass later in the year, with European plants anticipating reduced production stemming from uneconomic energy costs.
With the heatwave this week resulting in record temperatures melting runways and sending the train network into chaos, we were confronted with the stark fact that, at times, we are expected to work in atypical temperatures and we need to consider the full implications of this and what it means, not just to the way we work, but the materials we work with.
FIS reminds all members to check material data sheets for guidance around continuous working temperatures.
To protect members and support contractual issues that may arise, FIS has developed a factsheet focussed particularly on the performance of plasters and compounds in hot conditions and how this can affect the finish and performance of plaster specifically over 25oC.
In the week that the Grenfell Inquiry came to an end (the inquiring but anyway, it will be a while before the conclusions are made) we were greeted with a barrage of updates as Rt Hon Greg Clark picks up the mantle as Secretary of State for Levelling Up, Housing and Communities from Michael Gove. The announcements included that 48 Developers have pledged to remediate fire safety defects in buildings over 11 metres that they have played a role in developing over the past 30 years.
This has been followed by a raft of new guidance around how government is going to honour their commitment “to protecting innocent leaseholders from the unfair burden of remediation costs to make their home safe”. Their focus is now the buildings with 2 or more residential dwellings and at least 11 metres in height or has at least five storeys (whichever is reached first). Whilst a lot of attention is on the cladding, the guidance makes it clear that the scope of this new regulatory framework is now far broader too.
Through the Building Safety Act Courts have been granted new powers to extend liability to associated companies . The aim is to ensure that civil cases for claims against defective buildings can be brought against companies associated with a developer, preventing the use of complex corporate structures to avoid liability. The government is clear that developers must pay to fix buildings they had a role in developing or refurbishing, even where they no longer own the building. The Act ensures that building owners who are – or are associated with – the developer must pay for the remediation of historical safety defects.
The guidance published this week starts to look at the definition of “relevant defect” and what buildings (and leaseholders) are in scope of the protections. There is plenty of information published on cladding where cladding remediation is regarded as the removal of or replacement of any part of a cladding system that meets both of the following conditions:
it forms the outer wall of an external wall system
it is unsafe
But the wider relevant defect approach which identifies that non-cladding remediation is work is undertaken to fix a relevant defect, which is not an unsafe cladding system defect.
Examples of non-cladding remediation include:
replacing inappropriate fire doors
fixing missing compartmentation, which limits how easily fire can spread through a building
replacing combustible walkways or balconies
reinforcing low-strength concrete beams to improve structural integrity
fixing any other defect in scope of the relevant defect definition that is not a defect of the cladding system
Whilst the developer is in the cross-fire there it feels inevitable that the disputes will not have gone away and the battle ground has shifted. The likelihood is that the developers will be seeking redress through the supply chain and we got more than an inkling of this in the judgment recently handed down in the case Mulalley bs Martley Homes. Here contractor Mulalley was engaged on a design and build JCT 1998 Standard Form of Building Contract in 2005 to re-clad the exterior of the five tower blocks for Martley Homes. Full details of the case are available here (and well worth reading), but the headline is that that contractor is now required to pay £8 million in compensation. Commenting on the case FIS CEO, Iain McIlwee stated:
“This case is the first of many that will start to set precedent on historic claims and now that the Defective Premises Act has been updated and extended, it is likely that this will spread beyond the realms of cladding. We remain committed to ensuring that the mechanisms to manage disputes advance at the same speed as the Polluter Pays agenda so that the judgments are fair, but that huge time and resources is not wasted on legal fees and that we can focus our energies as an industry on getting to grips with the unacceptable legacy that the systemic failure created”
Detailed guidance from the FIS on the Building Safety Act via our Quality Hub here.
You can access the full range of guidance published this week here. We have included links to some of the most relevant sections below:
Following the Grenfell Tower fire, FIS has been working at the heart of Working Group Two (WG2), established as one of the Competence Steering Group (CSG) working groups to look at the competence of those installing fire safety systems. This remit subsequently expanded to cover all installers working in construction and the built environment.
WG2 has recommended that the industry should adopt a framework for all the installer sectors working on in-scope buildings that can be applied to other project types. The framework will consist of:
1. Accredited third party certification of companies
2. Level 2 or 3 qualifications for individuals
3. A card scheme such as, but not limited to, the CSCS
4. CPD refresher training and the maintenance of individual skills
5. All installers have a core knowledge of fire safety in buildings – training to be standardised and made mandatory
In line with these recommendations, WG2 has completed the first phase of its work benchmarking the existing competence arrangements of six pilot installer sectors which have the potential to significantly impact on life safety. The six pilot sectors are:
1. Domestic Plumbing and Heating
2. Dry Lining
3. Fire Detection and Alarms
4. Fire Stopping Specialist
5. Rainscreen Cladding
6. Roofing
The objective of ‘Pilots – phase one,’ was to establish the current competence arrangements, compare them to the WG2’s
recommendations and BSI Flex 8670: Core criteria for building safety in competence frameworks – Code of practice and identify
any gaps.
These Pilots have been completed and WG2 will now move to phase two and the six pilot installer sectors will reconvene with their own Chairs and Terms of Reference, to develop their sector-specific competence frameworks to meet the recommendations set out in Setting the Bar. This work is expected to last between six to nine months with each sector developing a timeline and implementation plan for addressing the shortcomings.
FIS has helped to assemble a working group to focus on Dry Lining, with the initial meeting of the Working Group Chairs scheduled for September. The organisation is providing support to this group to link to the work around firewalls identification and labelling and ensure that competency frameworks developed and the processes, support required to deliver the required level of competence are practical and to identify any obstacles to systemic success.
FIS CEO Iain McIlwee commented: “The Building Safety Act is here and we need to ensure that we have robust processes to meet the exacting requirements. Competence is at the heart of it and we looking forward to using this pilot to pull together a lot of hard work that has been put in by members and particularly our Skills Board to ensure that we don’t just know what good looks like, but we know how to get there. This is a great opportunity to show that the sector is stepping up.”
To help track movement of wage rates in the UK FIS launched in 2021 The FIS Wage Rate Index. The aim of this work is to support contract negotiations and to help track the impact of shortages on the cost breakdown of projects.
The survey is conducted every six months and FIS is encouraging all contractor members to take part to add to the rigour and value of the survey. Data is published as a price index to allow for regional rate variations and all company specific data is managed in the strictest of confidence. The survey covers core trade roles, labourers, apprentices and construction and site managers.
THE DETAILED RESULTS OF THE SURVEY WILL BE MADE AVAILABLE EXCLUSIVELY TO CONTRIBUTERS.
Government have now published a new document that sets out amendments to guidance previously published in Approved Document B: Fire safety, Volume 1 – Dwellings and Volume 2 – Buildings other than dwellings.
These amendments will be incorporated in the online available Approved Document B Volume 1 and Volume 2 as from 1 December 2022. The changes highlighted in this amendment booklet take effect on 1 December 2022 for use in England.
The 2019 edition incorporating the 2020 amendments will continue to apply where a building notice or an initial notice has been given to, or full plans deposited with, a local authority before 1 December 2022 and either the building work to which it relates:
has started before that day; or
is started within the period of six months beginning on that day.
The changes focus on the following fire safety provisions:
Ban of combustible materials in and on the external walls of buildings:
Consequential amendments following the laying of the Building (Amendment) (England) Regulations 2022.
Updated provisions in Section 10 and 12 of Volume 1 and 2 respectively for residential buildings (purpose groups 1 and 2) with a storey 11m or more in height.
Secure information boxes: A new recommendation for secure information boxes in blocks of flats with storeys over 11m.
Evacuation alert systems: A new recommendation for evacuation alert systems in blocks of flats with storeys over 18m.
Clarifications and corrections: Clarification of further diagrams, further text clarifications and corrections.
Approved documents supporting compliance with the Building Regulations refers to an FD20 Fire Doorset in certain circumstances. This is no longer a commonly tested option with many manufacturers no longer testing to this standard and certification companies not offering 3rd party accreditation for FD20 products. In January this year, The Building Control Alliance took the decision to withdraw Technical Guidance Note 9 – Fire Doors in Dwellings in January 2022. This document set down a deemed to satisfy option that supported the determination of an FD20 based on the following descriptor:
It is still common for an FD30 fire rated door leaf to be installed in a site made frame without the installation of intumescent seals. Whilst this practice may not be directly supported by an appropriate fire test or independent certification, this method of installation has been widely accepted by building control (without objection from DCLG) as providing a sufficient level of protection to escape routes within dwellings.
NHBC has this month published, Technical Guidance note 6.7/19 – FD20 Fire doors (England and Wales) to clarify the situation with FD20 doors. The Guidance asserts:
Where a fire door is required by the building regulations, this includes the complete door assembly, whether assembled on site or delivered as a completed assembly, consisting of the door frame, leaf or leaves, essential hardware, edge seals and glazing, and any integral side panels. Together these components form the fire door, defined as a ‘fire doorset’ within the approved documents England.
Where the building regulations requires a minimum of a FD20 fire doorset and these are not available to purchase, a fire doorset capable of exceeding the minimum requirement should be selected, typically a FD30 fire doorset.
Where a FD30 fire doorset is purchased to meet a building regulation requirement to provide a FD20 fire doorset, the FD30 fire doorset must be installed in strict accordance with the manufacturers guidance to achieve the FD30 fire doorset performance, in order to ensure the minimum FD20 requirement is met.
From the 1st July 2022 NHBC will only accept fire doorsets which meet the requirements of the building regulations. Separate door frames and doors which have not been tested together will not be acceptable.
If you’ve had a go at reading the Building Safety Act, well done!! It was described to me this week as a Lawyers Paradise, it is a complex document that cross references a myriad of different Acts and Secondary Regulation and particularly the latter is yet to be fully written. We’ve even seen the documents like The Building (Higher-Risk Buildings) (England) Regulations 2022 (which included the provisions for how the Gateways are to be set out) temporarily withdrawn because they developed alongside the passage of the Building Safety Bill, but now don’t reflect the final Act, due to the number of amendments that the Government agreed to.
I spoke to the Regulator (HSE) at a Giri event this week and we talked about timings of the Gateways, the official timeline is looking at October 23 for the introduction of Gateway 2 and 3, but she went on to emphasise the gateways are about proving to the regulator you are compliant. But, the Act is in force now and ultimately the question we need to answer is “am I certain this building meets the functional requirements of the building regulations when it comes to structural and fire safety and will do for the next 15 years”. The Gateways are hard stop points that reassures the regulator that “construction won’t start until….” and “occupation will not happen until….” respectively. There is a lot of detail in “until”, but at it simplest it is “Construction won’t start until we know what we are about to build is designed to be safe and we have effective controls in place to ensure design is achieved” and “Occupation won’t happen until you can convince the Building Inspector that that is what you did”. They are also about information management to ensure that the buildings can be managed safely – we need to start thinking of the O&M Manual as something that is alive in the building than hidden in a drawer.
We’ve been exploring this all with members and colleagues across the wider construction sector, what it could mean in terms of timings and the order of things and when we need to be ready to work on the consultations around secondary regulations. One thing that has definitely been missed by some is that it is not just about residential work it is about working on buildings that are deemed higher risk. A lot falls into scope based on the premise that if the building is greater than 18m and has more than 2 dwellings in it, the entire building is in scope. So if you are working on a commercial building with a couple of penthouse flats on top, it is in scope (regardless of the fact your work may not touch those residential properties). The best guidance I have read so far is contained in the Guidance on Collaborative Procurement (link below), this includes some useful Q&A’s. We are working on our own core guidance and will be fleshing this out over the coming weeks, but if you have any questions don’t hesitate to get in touch and we’ll do our best to unpick things for you.
As an indication of where the problems might be, we can look to the lessons from Gateway 1, where HSE has raised fire safety concerns on planning applications for more than half of the higher risk buildings for which applications were made under the planning gateway one process. Whilst sadly much of this will be genuine areas of concern, others will be undoubtedly be fraggles in the process.
I remain convinced that the new Gateways are a force for good, they make single stage procurement processes less attractive and put the right emphasis on design development, pre-construction and change control as well as competence and planning, but there will inevitably be some pain in this and we do recommend you start looking out for any clauses that push the cost of delay into the supply chain where there is limited ability to control – remember this is start/stop do a failure to comply could leave e.g. a 12 week hole in a programme. FIS is picking this up with our legal advisors.
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.
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.
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”.
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.
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.”
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.
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:
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).
