by Iain McIlwee | 26 Sep, 2024 | Transformation
The government has, this week, unveiled new measures to support small businesses and the self-employed by tackling “the scourge of late payments”. New legislation being brought in the coming weeks will require all large businesses to include payment reporting in their annual reports – putting the onus on them to provide clarity in their annual reports about how they treat small firms. This will mean company boards and international investors will be able to see how firms are operating. Enforcement will also be stepped up on the existing late payment performance reporting regulations which require large companies to report their payment performance twice yearly.
The announcement by Business Secretary John Reynolds also sets down an intention to consult on tough new laws which will hold larger firms to account and get cash flowing back into businesses – this is seen as key to supporting growth.
How are requirements changing?
Under current laws, responsible directors at non-compliant companies who don’t report their payment practices could face criminal prosecutions including potentially unlimited fines and criminal records.
A new Fair Payment Code will replace the old Prompt Payment Code, and will be open to signatories this autumn. Businesses will need to prove they have met good payment standards before being awarded official code status.
This will be designed to push businesses to pay faster more often, to be awarded either gold, silver or bronze status. The Code will also shine a light on those responsible businesses doing the right thing by their suppliers and small firms.
It comes as part of our wider work to support SMEs to help go for growth with reform to business rates, getting more small firms exporting and our new industrial strategy.
A consultation which will be launched in the coming months, which will also consider a range of further policy measures that could help address poor payment practices. These new proposals, subject to consultation, will be bought forward on audit and audit committees, in order to help rebuild small businesses’ trust that they will be paid on time and to deliver on Labour’s manifesto commitment to tackle late payments.
Prime Minister Keir Starmer said:
We’re determined to back small businesses by unlocking their barriers to growth, and stamping out late payments is at the heart of this.
We know how important it is for business owners to have the peace of mind and certainty around their cashflow to keep their businesses alive. Late payments cost businesses tens of thousands of pounds and is one of the biggest reasons businesses collapse.
After years of delay, we’re bringing forward measures that small businesses have long been calling for to tackle late payments once and for all.
Business Secretary Jonathan Reynolds said:
Late payments are simply unacceptable and this government is determined to level the playing field for small business. When the cashflow runs dry, small firms go under which is why we need to hold larger business to account with their payment practices and foster an environment that supports growth and jobs.
Slashing trade barriers, reforming business rates, getting more SMEs exporting – this government is committed to small firms. We know there’s a lot more to be done, but today we are calling time on late payers once and for all.
New research published by the Department for Business and Trade has found payment problems multiply the further down the supply chain you go. With delays to payments increasing with each business along a supply chain, this results in smaller businesses generally experiencing more issues with late invoices than larger firms.
These new findings underpin the need to move quickly to crack down on late payments. The research also found that there was a clear imbalance between big and small firms, and that administrative errors are a major factor in creating slow payments with 24% of firms saying that invoices being incorrectly handled added to delays.
The government will work closely with industry to discuss what further measures can be considered to crack down on late payments while ensuring we strike the right balance and avoid excessive burdens on businesses.
The Small Business Commissioner, Liz Barclay, said:
I am delighted to announce a new Fair Payment Code will be launched this autumn. The new code will reward businesses that treat their suppliers fairly and pay them quickly. It will also include an ambitious new Gold Award which aims to make 30-day payments the new standard for which businesses can aim.
We need sustainable, resilient businesses at all levels of the supply chains, to achieve the growth the economy needs. That means paying everyone from the largest supplier to the sole trader quicker, so they have the confidence to invest, improve productivity and grow. Fair payment terms and on time payments are the key.
FIS Reaction
FIS has welcomed the announcements. The organisation had already been in touch to express concern that legislation due to be laid before Parliament before the snap election was called in June had been delayed. In their letter to Construcion Minister Sarah JOnes MP, FIS made the following statement:
<in construction> Large firms help enable projects, but it is the supply chain of SMEs who will need to find and invest in the 66% growth in the workforce we will need to deliver the homes that Labour is expecting. These SMEs find themselves at the mercy of inept and at times immoral procurement practices, contractual processes that leave them picking up the full risk of mistakes and omissions by others and credit and payment terms that make it almost impossible to plan and invest effectively as businesses.
SMEs are constantly paid late with appalling credit terms that often see them exposed to 90 days + of cost on a job before they receive a penny. With little protection available from insurance, this is offset by trade and charge card credit on materials. These SMEs have no protection from upstream failure and a raft of these in recent months has rocked our supply chain. Tracking payment practices (value not volume) is not enough (we need to look at how the supply chain is protected with bonds and project bank accounts), but a worsening payment trend can give the supply chain vital warning of a looming failure.”.
In her response, the Minister provided some reassurance that the new Government do understand the severity of the situation.
The Government is committed to creating a better business environment for small businesses. This includes taking action on late payments, to ensure small businesses and the self-employed are paid on time, and to increase transparency in relation to payment performance. Whilst the draft Statutory Instrument introduced earlier this year had to be withdrawn, the Government is fully aware of the importance of these changes to the payment reporting requirements to subcontractors in the construction sector. Therefore, it intends to reintroduce this legislation at the earliest opportunity. The legislation is now expected to be re-laid before Parliament in 2024, enabling commencement in 2025.
You can see a full copy of the Minister’s letter (in which she also expresses gratitude for the proposals set down in FIS Manifesto) here here.
Read FIS Manifesto for the new Government: A Blueprint for a better Construction here
by Iain McIlwee | 24 Sep, 2024 | Contractual and Legal
Following the recent unfolding situation with ISG, FIS Associate Member and insolvency practitioner BABR has clarified what this means for affected businesses and provide guidance on what you should do next.
Understanding Administration
Administration is when a company is given legal protection from creditors while an appointed administrator attempts to rescue the business or achieve a better outcome for creditors than liquidation would provide. During this time, creditors generally cannot pursue claims against the company without court permission.
It’s important to note that in cases like this, immediate payments to creditors are rare, except in exceptional circumstances. Most creditors will need to wait for the administration process to be completed, which can take time. Therefore, it’s crucial to manage expectations regarding cash flow.
Likely next steps for affected members:
- Monitor developments: Monitor announcements regarding ISG’s situation closely. The outcome of administration could range from a restructuring and continuing business to liquidation.
- Review your position: Now is the time to carefully review your contracts, outstanding payments, and ongoing ISG projects. Since payments are likely to be delayed, you may need to adjust your cash flow planning accordingly.
- Prepare for delays: Be prepared for a lengthy process. The administration process can be slow, and in many cases, creditors receive only a fraction of what they are owed, if anything at all.
How to manage cash flow:
- Cash flow solutions: Given the likely delays, consider short-term financing or invoice financing to maintain liquidity.
- Renegotiations: Speak to other clients and suppliers to potentially renegotiate payment terms or request upfront payments to help cover any cash flow gaps.
- Seek professional advice: It may be beneficial to consult professionals such as insolvency practitioners, accountants, or legal advisers specialising in business restructuring and financial distress. They can guide your situation, help you explore your options, and protect your business.
We understand that these developments may cause concern, and we’re here to help support you through this period of uncertainty.
by Iain McIlwee | 21 Sep, 2024 | Main News Feed
by Iain McIlwee | 19 Sep, 2024 | Main News Feed
FIS is aware of the unfolding situation with respect to ISG. As of today, our understanding is that ISG Construction Limited, ISG Engineering Services Limited, ISG Retail Limited, ISG Jackson Limited and ISG Central Services Limited have filed for administration.
It is important to note that ISG Fitout Limited (which accounts for around £500m and was profitable at the point of last filing) has not been included in the application. The parent company, ISG Limited, has, so far, not applied to the court. At this stage we do not have clarity on how these parts of the business will be impacted and you are advised to stay in close contact with your nominated contact if you are currently in contract.
Clearly this is an unsettling time for the supply chain and ISG staff members. FIS will be doing all we can to advise and support all involved.
If businesses are currently engaged by or are about to start work for any part of the ISG Group that has filed for administration, these contracts will be automatically terminated. FIS Commercial Advisers have indicated that it is highly likely that all affected ISG sites will be shut immediately. Any claim will be managed by the appointed administrator in due course. It is suggested that you still attend at your sites and recover any plant, site accommodation and any records that are currently on the sites.
If you are able to access site, then it is important that you take photographic, video and written records of your work in progress. These records will be invaluable in establishing the value of your “final account” and can be used for any negotiations with any main contractor who is brought in to complete the contract. You should prepare a schedule that shows a record of all outstanding payments including retentions and when these payments were due, if they are unpaid. If you’re currently in possession of materials that are required for the contract but have not been delivered to the site then make careful note of these and further advice will be provided in due course as matters unfold. You should avoid at all costs any damage to your completed works.
It will be helpful if you could send any information regarding the status of projects to FIS. In order to ensure we can provide the best possible advice and support, please forward any communications that you receive from the employer, the design team and also the Administrator in due course.
FIS and our advisors will do all we can to support members and we will be working with colleagues from across construction, Government and stakeholder groups to provide a united response in what is a very difficult time.
Our helpline can be accessed via 0121 707 0077 or you can Email: iainmcilwee@thefis.org with any questions or concerns that you have.
Apprentice and trainees who have been employed by ISG and are looking to source alternative employment should register their details with BuildUK who are co-ordinating this aspect of the industry response and please contact info@BuildUk.org. Other members of the team or employers in the sector who can offer alternative positions for trainees or employers, please email iainmcilwee@thefis.org.
by Iain McIlwee | 22 Jul, 2024 | Sustainability
FIS Project Reuse is live and underway. Encouraging reuse was highlighted as a priority for the FIS Sustainability Leadership Group. Following several round tables and working group discussions FIS has decided to take the plunge and set up a pilot storage facility in East London. This facility will help us to isolate and resolve the issues that are blocking a more systemic approach to re-use in key product areas. The pilot will interrogate barriers, potential commercial models and start to create a end-to end process supported by appropriate standards that will help to normalise and industrialise re-use.
The pilot will focus initially on suspended metal ceiling tiles and luminaires. The project is viable thanks to the support and financial contributions of 10 amazing pioneer partners from all parts of the supply chain. This intrepid group drawn from architects, fit-out contractors, strip out contractors, sustainability consultancies and manufacturers bring deep knowledge and a great balance of outstanding skills and practical experience to the table.
As a first step we have identified some ceiling tiles which will, hopefully, make their way to the storage facility shortly and we are visiting the site where they are currently installed next week. This process will help us understand what information is required to ensure that the process of finding a new home goes as smoothly as possible.
This project has the potential to create the framework to develop a universal marketplace for reuse products and thereby reduce waste and the carbon impact associated with fit-out projects.
We need your support to make sure we can take the project to the next step and continue on the great work that has been started. Contributions range from £2k to £5k. If you want to know more about or be part of a great project, please contact me at flavielowres@thefis.org
To find out more about the project and see our list of amazing pioneer partners click here
by Iain McIlwee | 5 Jul, 2024 | Main News Feed, Transformation
FIS today congratulated the new UK Prime Minister Sir Kier Starmer and his colleagues on their election success as Labour forms the new Government.
FIS CEO Iain McIlwee noted that “A new Dawn for the UK, means it is essential to deliver a new Dawn for Construction. The UK Construction Industry is at the beating heart of the country, enabling all other parts of the society and the economy to function and succeed. The construction sector is worth 9% of GDP to the and employs over 2.5 million people. But it is more than that, it provides our homes and infrastructure, it shapes our cities, preserves our heritage, provides our shelter and shapes our lives – great buildings are at the heart of a great nation.”
Two key areas of important focus for the new Government in their hundred day plan are:
Firstly Government as a procurer has perennially missed the opportunity to harness the potential of construction to support socio-economic development. Best value procurement is delivered by following principles of the Construction Playbook, but the Playbook is routinely ignored. Investment in the Value Toolkit took this a stage further, but this has never been realised. Section 106 and equivalent procurement interventions needs an urgent rethink to align to the Playbook and ensure value outcomes are measured on a National Level – more devolution is coming, but it should enhance not replace a national strategy.
The reality of building more homes (more anything) is we need more people. We have spent a generation building an industry around immigration, so this reform is going to take time and the infrastructure is not there (in our sector we need to double the best we did since 1974 to maintain the workforce we need).
Government needs to stop quoting International Benchmarks about arbitrary educational levels and “future skills” and look at what we need now. The landscape for L2 and L3 Apprenticeships has been decimated. The average apprentice is now over 25 and studying for a higher or advanced level apprenticeship. Only one in five apprenticeships is in a shortage occupation.
We need 1 in 10 people to choose to work in construction and we need them more work ready than they are now. The role of the education system is to get people work ready and it then becomes the responsibility of the employer to turn work ready to competent and develop them. Our reality is that kids leave school (and often college) nowhere near work ready and conditioned to think of construction as a last resort, not recognising we are the bedrock of all social and economic evolution. The dialogue in schools about our industry needs to change, it is a well paid and essential sector. This was evidenced in the chaos of Covid when Government failed to deem construction essential workers, but still needed the “essential work” done.
In the meantime, we need an approach to migration and the Shortage Occupation list to be an agile stop gap solution.
We also caution Labour to consider carefully their plan to be tough on contingent workers. Government needs to be mindful of a quote that jumps out for me from the Reading Report:
“To invest in a directly employed workforce would render many firms uncompetitive given the limited focus on genuine and enduring collaborative relationships that procurement practices allow. The consequential reliance on contingent forms of labour is an issue of commercial reality rather than preference but has a detrimental impact on the training culture.”
Finally the Building Safety Act is a force for good, but there are some big gaps. A key to tightening is to ensure that a Design Responsibility Matrix in included in the list of regulated documents for the Building Safety Act, ensuring that this vital mechanism to make system based decisions based on the right advice at the right time is in place.
Read FIS Manifesto for the new Government: A Blueprint for a better Construction here
by Iain McIlwee | 2 Apr, 2024 | Contractual and Legal, Transformation
A new stricter procurement regime is being introduced to support the Government’s 2019 Manifesto commitment to ‘..support start-ups and small businesses via government procurement, and commit to paying them on time…. <and> clamp down on late payment more broadly…’.
The Public Procurement Notice PPN 10/23 comes into force on the 1st April and demands historic payment performance is taken into account when awarding new Central Government contracts with a value in excess of £5 million per annum.
Contracting authorities must verify that the successful bidder meets the selection criterion prior to award of the contract or appointment to a framework agreement or dynamic purchasing system. The criterion is based on:
- Whether the bidder has paid its suppliers in accordance with the contractual terms that it applies to its supply chain; and
- Whether, overall, the bidder has paid its suppliers promptly by:
- paying at least 95% (at least 90% if an action plan is provided) of invoices within 60 days, which is considered an appropriate measure of overall payment promptness, and;
- meeting the average payment days threshold of at least 55 days for all invoices.
Reporting on this requirement will take into account a twelve month period and the bidder must demonstrate that they meet the required standard in at least one of the two previous six month periods – intercompany payments should not be included.
Where the bidder has reported payment data every six months in accordance with the Reporting on Payment Practices and Performance Regulations 2017, the two most recent reports can be submitted. If the bidder has recent data for the previous three or more months which has not yet been reported under the regulations, then this can also be submitted as a reporting period.
Where bidders are not required to publish their data in accordance with the regulations, they should still submit the previous twelve months’ worth of available data in two (six month) periods in line with the Department for Business and Trade Guidance to Reporting Payment Practices and Performance.
The criteria for applying the rules is summarised as:
|
Bidder pays ≥95% of all supply chain invoices in 60 days and the bidders average payment days are also ≤55.
Both metrics are hit concurrently in at least one of the previous two six month reporting periods.
|
Bidder meets the required standard. |
Pass |
|
Bidder pays ≥90% < 95% of all supply chain invoices in 60 days and the bidder’s average payment days are also ≤55.
Both metrics are hit concurrently in at least one of the previous two six month reporting periods.
|
Bidder demonstrates action plan that includes (as a minimum) the following:
1. Identification of the primary causes of failure to pay:
(a.) 95% of all supply chain invoices within 60 days; and
(b) (if relevant) all supply chain invoices within agreed terms.
2. Actions to address each of these causes.
3. Regular reporting on progress to the bidder’s audit committee (or equivalent).
4. Plan signed off by a director.
5. Plan published on its website. (This can be a shorter, summary plan) |
Pass |
|
Bidder pays ≥90% < 95% of all supply chain invoices in 60 days and the bidder’s average payment days are also ≤55.
Both metrics are hit concurrently in at least one of the previous two six month reporting periods.
|
No action plan or action plan does not include all of the above features. |
Fail |
| Bidder pays <90% of all supply chain invoices in 60 days in both of the previous six month reporting periods after removing intercompany payments (if relevant). |
Bidder’s payment performance falls substantially below the required standard. |
Fail |
| Bidder’s average payment days are >55 in both of the previous six month reporting periods after removing intercompany payments (if relevant). |
|
|
Exemptions should only be considered:
- where the market for a contract of this type is distorted/narrowed/struggling to such a significant extent that delivery of public services is likely put at risk, or value for money is likely to be severely compromised;
- where there is a civil emergency.
FIS CEO Iain McIlwee commented:
“Whilst this another positive step, we are still talking about lengthy payment periods in an industry where up-front costs have increased substantially in recent years. It is also narrow in application, the requirement to comply with this notice only binds Central Government Departments, their Executive Agencies and Non Departmental Public Bodies where the contract value exceeds £5 million. It does not apply to NHS trusts, local or devolved authorities and there is also a fair bit of wiggle room provided in the exemptions. All this means in real terms the impact will limited for the vast majority of those working in the finishes and interiors sector. That said it is further recognition of the importance of an issue which remains a cancer at the core of construction and our hope is that as procuring authorities look to the new Regulatory Requirements and concerns about the resilience of the supply chain that they look to exceed the expectation set down in this PPN.
With increased Government support it is more important than ever that we call-out poor practice. If you have payment concerns FIS is able to take these foward anonymously both directly and working with the Small Business Commission (who has sanctions via the Prompt Payment Code). Through FIS you also have access to QS, Legal and specialist credit checking services that can help to expedite payment – nothing changes if we do or say nothing and we will always look to act in your best interests”.
A full copy of the PPN is available here
by Iain McIlwee | 7 Feb, 2024 | Market data, Material Shortages
The FIS Wage Rate Survey H2 2023 conducted in January 2024 revealed that, across the trades, FIS members have continued to experience wage rate increases averaging around 4% in key trade occupations (the full index is available to contributors only.
The survey also explored some of the concerns that are currently being experienced related to risk dumping through the supply chain.
Commenting on the data FIS CEO Iain McIlwee stated:
“The numbers clearly shows that the supply chain continues to be hit by inflationary pressures. Some of the contractual issues are also a worry, close to 60% of our specialist members are being asked to sign unfair contracts. Encouragingly there is evidence here that the Responsible No is being exercised, but the numbers are still out of balance. There is also evidence that design, programme and compliance risk are increased with over 70% stating that they routinely being asked to take more risk in terms of Design and close to 90% stating the same for programme. These numbers are not surprising, but they are concerning, especially against the backdrop of rising cost and more limited insurance cover available“.
In 2024 FIS launched the Responsible No Campaign to help bring attention to the pressures that specialists are under and the indiscriminate risk dumping that is evident in parts of the supply chain.
IF you wish to participate in future wage rate surveys, please contact the FIS on info@thefis.org and we will make sure you recieve appropriate updates.
by Iain McIlwee | 14 Dec, 2023 | Market data
To help monitor wage rate inflation (and other contractual issues), 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 labour shortage on the cost breakdown of projects.
The survey is conducted every six months and FIS is asking all contractor members to take part. 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 CONTRIBUTORS.
You can complete the survey via the link here. The survey will close early in the New Year. If you cannot complete, please share the link with the person in your business who can.
Your support is, as ever, appreciated.
by Iain McIlwee | 8 Nov, 2023 | Market data, Material Shortages
Commenting on the data FIS CEO, Iain McIlwee stated:
“Whilst it is encouraging to see the rate of inflation coming down, this index does not necessarily reflect what individual contractors are experiencing on the ground. Whilst generic data is helpful, the index is broad and there are fairly large differences between the different material types and the headline may not align to the specific products specialists are procuring or deals they may be locked into.
“Beyond this it is important to remember that materials only typically reflect around 30-40% of the cost of construction and we have continued to see wage rate inflation trending high – the FIS Wage Rate and Productivity Survey published this week pointed to continued day rate inflation across all the key trades in our sector.
“The final cost to factor in, is that new regulation is putting pressure on all in the supply chain and the cost of compliance is impacting prelims.
“Looking ahead, the signs seem to be that the period of hyperinflation has passed, but this doesn’t mean real world prices are falling and we cannot be complacent. The full impact of recent events in the Middle East on energy and material prices remains unknown and just because work may be slowing down in some areas it does not necessarily follow that prices will drop.”
Source: Department for Business & Trade – Monthly Bulletin of Building Materials and Components, Table 1
If you are interested in participating in the FIS Wage Rate Survey and receiving a copy of the data, email iainmcilwee@thefis.org (data goes back to 2020, but is only available to contributing companies).
by Iain McIlwee | 17 Aug, 2023 | Building Safety Act
With the October deadline looming, the much anticipated Secondary Regulations under the Building Safety Act 2022 have been published today by the Department for Levelling Up, Housing and Communities. The five key pieces of regulation laid today are:
- The Building Regulations etc. (Amendment) (England) Regulations 2023,
- The Building Regulations (Higher-Risk Building Procedures) (England) 2023
- The Building (Approved Inspectors etc. And Review of Decisions) (England) Regulations 2023
- The Higher-Risk Buildings (Management of Safety Risks etc) (England) Regulations 2023
- The Building Safety Act 2022 (Consequential Amendments etc.) Regulations 2023
The regulations aim to deliver the recommendations of Dame Judith Hackitt in her report Building A Safer Future and cover the technical detail underpinning the new, more stringent regime for the design and construction of higher-risk buildings, wider changes to the building regulations for all buildings and the details of the new in-occupation safety regime for higher-risk buildings.
The regulations can be found here: The Building Safety Act: secondary legislation – GOV.UK (www.gov.uk)
Alongside the regulations, they have published the responses to the consultations on them which were held last summer. The government response to the consultations can be found here:
These Regulations will fundamentally reform the way buildings are designed, built and managed to ensure safety of those who live in them. These Regulations introduce significant reform to building control for all buildings and a new bespoke approach to building control for blocks of flats, hospitals and care homes of 18m or more or seven stories or more under the new Building Safety Regulator.
The Regulations also introduce the new in occupation regime where dutyholders must demonstrate they are proactively engaging with residents on building safety and demonstrate to the building safety regulator that they are managing the building safety risks in their building – fire spread and structural collapse – appropriately.
The next sets of regulations related to the new regime will be laid shortly. The Higher-Risk Buildings (Keeping and Provision of Information etc) (England) Regulations and the Charges Regulations are due to be laid next month. The former regulations will cover the information that accountable persons for occupied higher-risk buildings need to keep as golden thread information and what information they need to share with residents and other people who are involved in ensuring the safety of the building. The latter will set out the approach to charging by the Building Safety Regulator.
FIS will be reviewing in detail and provide summary as soon as practical. In the meantime, you find out more about the Building Safety Act via our Building Safety Act Hub here.
by Iain McIlwee | 16 Aug, 2023 | Health and Safety
From September – HSE site inspections across Great Britain to focus on moving and handling materials
Starting in early September 2023, HSE will be undertaking construction site inspections, focusing on moving and handling construction materials. The inspections will be checking employers and workers know the risks, plan their work and are using sensible control measures to protect workers from injuries and aches, as well as pain and discomfort in joints, muscles and bones known as musculoskeletal disorders (MSDs).
These injuries can have a serious impact on workers’ ability to perform tasks; their quality of life; and in some cases, their ability to stay in work and earn a living.
This latest health inspection initiative is supported by the ‘Work Right Construction: Your Health Your Future’ campaign to improve the long-term health of those working in construction.
Find out more about the campaign by visiting:
The supporting resources from HSE includes a range of posters and site signage and guidance in the form of:
Commenting on this campaign FIS CEO Iain McIlwee stated:
“The concept of Occupational Health is an area that there has been growing understanding of in recent times. We have a responsiblity, not just in terms of safety, but looking after the long term health of our workers and limiting the potential damage that can result from lifting heavy items. There is more work to be done here to support a more inclusive workforce too as well as helping to extend careers in the sector and ensure that we optmise productivity and attack the labour shortage from all angles.”
Specialist advice is available from FIS to support activities including a free helpline and Health and Safety Working Group that convenes to review accidents and exchange best practice where necessary, latest guidance includes:
FIS Manual Handling Guide: Safe handling of plasterboard (which is relevant for all moving board type material) and Recommendations for the safe ingress of plasterboard (which looks at how material should be moved through the site). Members also have access to AWCI: Safe Work Practices for Wall and Ceiling Industry Construction Workers, a guide developed for the US market, but has been made available to FIS members through our partnership with AWCI).
The FIS Health and Safety Toolkit is available here
by Iain McIlwee | 1 Aug, 2023 | Main News Feed
It has been confirmed that the next edition of JCT (JCT 2024) is anticipated to be issued in the early part of next year. The final decision on the release date will be determined by when the secondary legislation necessary to implement many of the provisions of the Building Safety Act 2022 has been published (expected to be finalised by October 2023).
What are the key changes:
Modernising and streamlining: changes will include the adoption of gender-neutral language, provision for execution by electronic signature and the facility for notices to be sent electronically.
Fluctuation provisions: Price uncertainty is set to continue and the JCT has launched a new fluctuations hub to offer guidance on its Fluctuation Options and also plans to move the fluctuation provisions to an online document to increase prominence and accessibility. Currently, fluctuation Options B & C are available online while Option A features in the JCT contracts.
Extensions of Time: There will be new relevant events to cover epidemics, updates to how ‘statutory powers’ are dealt with and ‘Statutory Undertakers’ will be redefined to ‘Statutory Providers’. In addition, the period of time for the Employer to assess an interim extension of time will be reduced from 12 weeks to 8 weeks from receipt of the Contractor’s particulars. The relevant event dealing with antiquities will be extended to deal with UXB’s, contamination and asbestos.
Loss and expense: The Contract Particulars will provide for parties to include optional additional grounds for the contractor to claim loss and expense. These include epidemics and the exercise of statutory powers by the UK Government which directly affects the works. The relevant matter dealing with antiquities will be extended to deal with UXB’s, contamination and asbestos.
Liquidated damages: The JCT is also making amendments to reflect the Supreme Court’s decision in Triple Point Technology Inc (Respondent) v PTT Public Company Ltd (Appellant) (2021). The decision restores the orthodox position that liquidated damages clauses apply up to termination of a contract, but not thereafter. Clear wording must be used if parties want to agree a different approach. The planned updates to the JCT will provide that where works are not complete at termination, LDs can be levied up to termination and only general damages for delay can be claimed thereafter.
Resolving disputes, arbitration and adjudication: Parties will be able to choose a nominating body or appointer of their choice, as opposed to the original short list. However, it is anticipated that the particulars will still include a list of bodies, as the AICA is being removed (due to it now being defunct). The notification and negotiation of disputes, set out at Supplemental Provision 10, will no longer be an optional provision. Subject to the parties right to refer a dispute to adjudication, this provision deals with the avoidance or early resolution of disputes or differences by requiring each party to promptly notify the other of a matter that is likely to give rise to a dispute or difference. It also requires senior executives to meet “as soon as practicable, for direct, good faith negotiations to resolve the matter”.
Allocation of risk: There will be a new provision added to the contract to deal with unexploded ordnance, contaminated materials and asbestos.
Legislative changes: There will be updates to reflect recent legislation including the Building Safety Act and its secondary legislation (once this has been finalised) and the two new insolvency grounds that were introduced under the Corporate Insolvency and Governance Act 2020 will be added.
Construction Act: There will be revisions to termination accounting provisions to reflect the requirements of the Construction Act, in particular a due date for the final payment after termination will be added.
Future proofing: The contract has been drafted with consideration to the Construction Playbook, sustainable development, collaborative working and environmental considerations.
In addition, a new set of contracts will be added to the suite. The Target Cost Contract, the Target Cost Sub-Contract and the Target Cost guide will be published alongside the updated suite.
While the final amendments are not released yet, the above is understood to be a good guide for the changes that are being implemented.
Commenting on the changes, FIS CEO Iain McIlwee stated:
“Changes to JCT are long overdue, there has been a lot of water under the bridge since 2016! But, whilst the changes are welcome, recent research by Reading University points to the fact that the very concept of a standard form of contract is to all extent and purposes almost dead.
It is vital that these changes are heralded with some real leadership making it clear that the contracts are designed to be used in an unamended format. Where amends are deemed necessary the users should be cautioned against “risk dumping” and the contracts should be deemed invalid unless changes are clearly marked up in the body of the contract instead of included in an unwieldy schedule of amends.
The new Building Safety Regulations emphasise that risk should be dealt with by the person most able to manage it – there is a huge opportunity for JCT to get behind this principle and champion the import of standard and unamended contracts.”
This summary of the changes is based on content in the latest edition of JCT News
by Iain McIlwee | 1 Aug, 2023 | Technical
The Department for Business and Trade announces an indefinite extension to the use of CE marking for UK businesses, but DLUHC (who regulate Construction Products) have indicated that this extension will not apply to construction products.
The Department for Business and Trade (DBT) has announced today a package of smarter regulations designed to “ease business burden” that includes recognition of the CE mark in the UK beyond the 2024 deadline. This means British firms will be able to continue the use of CE marking alongside UKCA in perpetuity. But, FIS have been informed that this easement relates only to the 18 sectors that fall under DBT – it does not apply to construction products.
Announcing the change Business Minister Kevin Hollinrake stated:
“The Government is tackling red tape, cutting burdens for business, and creating certainty for firms – we have listened to industry, and we are taking action to deliver. By extending CE marking use across the UK, firms can focus their time and money on creating jobs and growing the economy.”
DLUHC have indicated to the Construction Products Association (who are leading representation on this matter through the Construction Leadership Council) that recognition for construction products will continue until 30th June 2025 ONLY. The rationale offered is that the Government remains committed to ensuring the testing regime for construction products is effective and inspires public and market confidence. DLIHC have indicated that they will set out their proposals for reform of the construction products regime in due course.
Commenting on this announcement FIS CEO Iain McIlwee stated:
“The logic is hard to follow here. All the arguments about red-tape, business burden, avoiding cliff edges and refocussing on innovation and growth that apply are replicated, even magnified, in the construction sector. The unnecessary re-testing of product that transitioning to UKCA necessitates is a waste of resource and, particularly in the case of fire safety, precious furnace time. The Government talk about pragmatism, but this is not extending to construction and that is disappointing and frustrating in equal measure. I only hope that “due course” considers, but doesn’t conflate the need to focus on product safety, which is a very separate and significantly more important issue to address.”
You can read the full announcement here.
by Iain McIlwee | 27 Jul, 2023 | Building Safety Act
Cladding Safety Scheme opens to give thousands more buildings access to government funding to fix dangerous cladding for the first time.
The government has announced its biggest building safety intervention to date as part of a wider package of measures to help end the building safety crisis across England.
The full opening of the Cladding Safety Scheme (CSS), announced in a speech by Housing Secretary Michael Gove, means that costs associated with removing unsafe cladding in mid-rise buildings will now be covered by government funding, protecting leaseholders from costs where the responsible developer cannot be made to pay. It is estimated that thousands more mid-rise buildings will qualify, giving tens of thousands of residents across England a pathway to a safe home, with no cost whatsoever to leaseholders in the building.
The CSS will be funded by both the £5.1 billion allocated by government to fix the most dangerous buildings and through revenue from the Building Safety Levy on new development.
The scheme will be available to all medium-rise buildings between 11 and 18 metres across England and high-rise buildings over 18 metres outside of London where fire safety professionals have recommended that works must take place. The scheme will also be available to the social housing sector.
All building owners who believe they are eligible for funding need to apply through Homes England Cladding Safety Scheme application portal.
Any leaseholders or residents living in a building they think is eligible for funding will be able to provide further information about their building using Homes England’s ‘Tell Us tool’.
Peter Denton, Chief Executive of Homes England, said:
The Cladding Safety Scheme pilot was an important step in removing the cost burden on leaseholders trapped in unsafe homes and built on the progress made on building safety.
The full rollout of the programme allows us to go even further. Our team is ready to go, and we expect thousands of buildings to benefit over the next decade.
We will continue to work with DLUHC to ensure the pace we’re working at is maintained, so we can bring peace of mind and protection to the millions of people whose lives have been affected by unsafe cladding.
The opening of the CSS means that costs of fixing dangerous cladding for all buildings in England over 11 metres will now be covered either by government funding or by developers who built them.
Earlier this year, the Secretary of State secured the signatures of 49 of the country’s biggest housebuilders on his developer remediation contract – a major step toward ending the building safety crisis.
The developers all put pen to paper on the legally binding document and committed themselves to fix unsafe buildings they developed or refurbished in England over the 30 years to 5 April 2022. The government has now written to eligible developers to invite them to join the Responsible Actors Scheme giving them 60 days to respond. Eligible developers who choose not to join, or who join the Scheme but then renege on their commitments, will be prohibited from carrying out major development or obtaining building control approvals.
While funding is a major part of solving the crisis, it is also important that residents see swift progress once work has been deemed necessary. The government has been clear that there is no excuse for unsafe cladding to be left unmanaged. Building owners must meet their legal obligations to fix fire safety defects in their buildings and make homes safe quickly.
The Department for Levelling Up, Housing and Communities, the Building Safety Regulator, the Local Government Association, and the National Fire Chiefs Council have today published a joint statement committing to work together to enforce the remediation of fire safety defects, underlining their commitment to see buildings made safe faster. Building owners who continue to stall can expect to face robust enforcement action from regulators, with the full support of government behind them.
The Greater London Authority will continue to deliver remediation to London-based 18m+ buildings through the Building Safety Fund.
Buildings in England already progressing through the Building Safety Fund will not be transferred into the new CSS but their progress will remain unaffected.
by Iain McIlwee | 27 Jul, 2023 | Market data
Workloads reported by members in the FIS Q2 State of Trade Survey have continued to trend positively with a higher balance (18% up from 5% in Q1) reporting Growth. Within this, 35% of members have experienced growth greater than 5% and just 29% reported a decline for the quarter. The balance (-7%) of respondents did, however, report a decline in sales in Q2 2023 with those reporting a growth in sales dropping from 75% to 43% quarter on quarter. This is the first time the net balance has been negative since Q3 2020.
This trend is consistent with data from Barbour ABI which has highlighted that most sectors have seen falls in terms of contract awards compared to Q1, with notably industrial reducing by 45% and healthcare by 50%. Conversely, awards over Q2 in education continued on a positive trend and the commercial sector remained relatively positive albeit volatile. NHBC has reported that Q2 new house building registrations fell in the UK by 42% compared with a year ago according. It should, however, be noted that was from a base almost double the long-term average. The numbers in 2022 were distorted as house builders worked to get ahead of the new building regulations.
Looking ahead to the next quarter, both sales and workload for the next quarter are trending positively, but the balance is lower than the past couple of quarters. There are still reports of work slipping with rising interest rates and concerns over compliance (particularly linked to staircases) impacting viability of projects. It is also worth noting that, whilst overall trend remains positive, 20% of members are expecting workload to slip by in excess of 5% in Q3.
Members can access the full FIS State of Trade Survey Q2 2023 here
by Iain McIlwee | 25 May, 2023 | Market data
Uncertainty surrounded the start of 2023 in the finishes and interiors sector with concerns (particularly in the housing sector) resulting in 32% of respondents seeing a reduction in workloads. Whilst there remain underlying concerns related to ongoing inflation and a rising cost of capital impacting viability and delaying starts, 37% did experience increases and confidence has built through the quarter.
Commenting on the release, FIS CEO Iain McIlwee said:
“The data here was timely as we met wiith Bank of England representatives this week along with a small delgation of construction organisatons led by BuildUK. The overall situation remains that things are more positive for most than many had anticipated. There remain some clear risks and uncertainty that will mean growth overall in the economy is likely to remain subdued and this will have an impact on construction. Interest rates will be key, with inflation reports this week slightly higher than anticipated and consequently the 5.0% peak anticipated rates is already being talked up and we have seen a reaction from certain high street banks increasing mortage rates. The cost of mortgages and finance for large commercial projects will remain a key risk.
The election will also have a distorting effect, with Autumn 2024 a probable date. How policy adapts to drive home ownership and construction and encourages investment from business will again be key. The long term need to get building homes and hospitals as well as redeveloping commercial space to meet modern requirements and sustainable goals is all positive, but how policy drives this may be limited by political motivations.
Resiliance in the supply chain too remains a concern with higher levels of insolvency in construction driven by aggressive procurement and cash/credit issues that are being cascaded through the supply chain and leaving SMEs vulnerable. The full impact of the Building Safety Act and legacy are still to be fully understood.”
Read the full state of FIS State of Trade Survey Here – FIS State of Trade Survey Q1 2023
See Also – CPA survey reveals a cautious improvement in Q1
After the uncertainty-filled end to 2022, conditions have become more settled in Q1 with product manufacturers’ sales and contractors’ workloads indicating an improvement in conditions for construction.
by Iain McIlwee | 28 Apr, 2023 | Building Safety Act
Last week saw the publication of The Independent Review of the Construction Product Testing Regime which was announced by government in April 2021 and was led by Paul Morrell OBE and Anneliese Day KC.
The purpose of the Review was to
- to identify any potential weaknesses in the system and
- to make recommendations for improvement.
It undertook a critical assessment of the system for testing and certifying construction products and how the system could be strengthened to provide confidence that construction products are safe and perform as labelled and marked.
It is a wide ranging report and recognises contributions from FIS. Key points to draw out include:
- Concerns remain over fragmentation and there is a greater focus required on how products work within systems and understanding responsibility
- Recommendatons around the definition of “safety critical products”, to include; Fire resisting construction (eg in compartment walls), including glazing, Class A1 material for shaft construction, Fire doors and doorsets, door closers, Cavity barriers, Fire resisting ceilings, Fire-stopping
- Regulations to be tightened to ensure all products have a “general safety requirement” and are embraced by the Construction Products Regulation, requiring them to report consistently on essential characteristics through adoption of the Declaration of Performance process.
- The need to strengthen enforcement and importance of getting behind the Code for Construction Products Information
- The call for a Standard to support assessment of performance to augment testing and scope
The report also touches on the suggestion of licensing for main contractors to help improve the safety culture. We are not expecting a formal response from Government to the recommendations, but they will inform the Building Safety Regulator as they develop the regulatory and enforcement landscape over the coming months.
You can view all the documents relating to the independent review led by Paul Morrell OBE and Anneliese Day KC here. FIS is currently working on an executive summary for members.
For all information related to helping members comply with the new regulatory requirements and the Building Safety Act here
by Iain McIlwee | 28 Apr, 2023 | Transformation
FIS had today responded to the Amendments to the Payment Practices and Performance Regulations consultaton calling for an overhaul that will better support SMEs in the sector.
The FIS response draws on recent research conducted by the University of Reading into procurement, contractual and payment practices in the sector. It challenges headlines indicating that payment in construction was improving, on the basis of flawed data that fails to measure the value of invoices paid and is opened to being gamed. As it stands companies only need to report on the percentage of invoices paid, but does not measure value. Whilst the guidance does make clear that invoice in construction should mean application, this is not regulated and there is little to no enforcement of how companies are reporting. This misleading dataset masks a cancer at the core of construction that is killing businesses and ruining lives.
In the response FIS makes it clear that whilst metrics on the average percentage of volume of payments made are useful but fail to give us a true picture of payment performance. As it stands efficient payment of small invoices for e.g. business facilities or stationary could mask differing practices within the construction sector, typified by larger payments. The FIS also recommends that Duty to Report obligations should be incorporated into annual Audit requirements to ensure that there is third party scrutiny of auditing practices.
The FIS is also calling for a clampdown on retention practices. FIS Research dentifies 33% of main contractors always secure retention, compared to 14% of specialists. This concern here is that a significant proportion of retention that should cascade through the supply chain is actually realised as profit. FIS continue to advocate for the ultimate abolition of retention, but in the interim, to ensure that retentions are protected, associated only with the work packages undertaken and AUTOMATICALLY RELEASED based on a defined date (rather than abstract event). This should be Regulated and monitored to prevent nefarious practices.
In a seperate consulation the FIS has applauded the efforts of the Small Business Commissioner recommending that the Office is strengthened, responsibility in the construction sector is extended and that the office is given more resource and greater powers to support SMEs in the supply chain.
You can read the full FIS Payment and Retentions Submission 2023 here and response to the Small Business Commissioners Consultation here.
The consultation closes at 11:45pm tonight and FIS has also prepared a template response to encourage members to feed their views in here.
by Iain McIlwee | 31 Mar, 2023 | Transformation
In March FIS attended a round table with CLC and Government officials to look into payment practices, retention and support available through regulation via the Duty to Report. I think there is a desire from Government to beef things up a bit to support SMEs, but we need to ensure that they see votes in change and that small businesses feel strongly about it – so to get change over the line we need your help. We will, but we also need you to respond to the consultation.
What is the aim in all this?
Recent headlines that payment practices in construction are improving are, at best, misleading. Our own research with the University of Reading (shown in the chart at the top of this page) tells us that, for most in our sector, it is no better and, for nearly a quarter of specialists, it is worsening. The improvement headlines ring particularly hollow when we see the human impact of poor practice and you know and care for the people that our QS helpine has been working with – it is not just cashflow and the cost of money that concerns us, the stress and human toil of poor payment is literally sickening.
Where the market fails to correct we need regulation to drive better behaviour. Effective Regulation needs three things, a clear and proportionate set of rules and scope, an mechanism to measure and impactful enforcement.
Why does official data suggest it is getting better, but I am not seeing any (positive) change?
The old addage… lies, damned lies and statistics comes to play here. The headlines are based on information extracted from the Duty to Report. The concept of the Duty to Report is it exposes payment practices – it compells larger businesses (those that satisfy two of the following £36 million in turnover, £18 million on its balance sheet and 250 employees) to formally report on payment times against an agrreed criteria. This means Government can make procurement decisions based on it, have a formal measure to support initiative like the Prompt Payment Code and equally SMEs can check theoretically check a company’s payment history (here) to help decide if you want to work with them. It is a good concept in that it highlights a problem, but the issue is that it is poorly delivered.
The underlying problem is that companies only report on volume of invoices, not value. Ten tiny invoices (for e.g. stationary) can drown out one huge invoice for construction. She system can be gamed by selecting what invoices to pay early to mask that you are paying the big ones late. Thus you can still continue to use the supply chain as a free line of credit and still look good on paper!
The other big issue for construction is that it measures invoice payment, but in the complex world of applications, valuations, pay less notices and certification the invoice is not . The guidance is actually fairly cut and dry:
- For construction contracts in scope of the Housing Grants, Construction and Regeneration Act 1996 or the Construction Contracts (Northern Ireland) Order 1996, businesses must use the earliest point at which they have notice of an amount for payment.
- This would generally be the date they receive an application for payment or, in cases where there is no application for payment, the date on which they receive a payment notice (or default payment notice) or on which they issue a payment notice – whichever is earliest. Day 1 of the time taken to pay will be the day after the day on which the business has this notice.
but, guidance is not regulation and frankly there are no meaningful checks and balances on how people are reporting. In fact in our digging, it was identified that there have been only 18 investigations and no prosecutions. Without proper checks and balances and strong enforcement, regulation is about as useful as a chocolate teapot!
Aren’t we supposed to be getting rid of retention by 2025?
The CLC roadmap to zero retentions does say that they should be phased out no later than 2025, but like so many ‘Roadmaps’ we seem to have lost the road!! I remain concerned that retention debate often gets derailed by trying to solve two problems at once. For me there are two distinct parts to this debate:
1. the underlying concept of retention – how we work, as a sector, manage trust and quality with clients to evolve away from retention and ultimately how our Standard form Contracts support this evolution.
2. how they are fairly and consistently deployed within the supply chain – a key conclusion from our research is that they aren’t and the further down the supply chain, the less likely you are to actually get your retention.
I know it is more nuanced than that in terms of why and whether people have claimed, but for whatever reason the retention isn’t cascading smoothly (certainly not automatically). If you think of certain parts of our market, the low margin means that the tier one is making around 3% profit on average – the value of retention effectively sit at their approximate profit. Whilst there is a cash concern that more might be held against than they hold, the motivation for the less scrupulous in the supply chain, the difference between the 33% of main contractors and 14% of specialists always securing retention is about 19% of profit. For this reason FIS can continue to advocate for the ultimate abolition of retention, but in the interim, to ensure that retentions are protected and AUTOMATICALLY RELEASED based on a defined date (rather than abstract event).
So what do we need you to do?
The purpose of this post is not to rant about things we all know, but to emphasise that FIS reserach is helping to inform a debate which is happening and there does now seem geniune interest from Government in addressing some of these issues and appreciation that continued nefarious practices in construction undermine the cultural changes that they want to see. This is where you come in…
Full details of the Payment Practices and Performance Regulations 2017 consultation here
You can respond via the webiste or by copying and adapting (where you feel necessary) below in an email to the consultation questions to responsiblepaymentculture@beis.gov.uk (by 11.45pm 28th April 2023).
We have with colleagues representing specialists set down a template response that you can be downloaded below, but remember this is your response so do feel free to edit/ammend and add any personal comments or experience to help support understanding and change.
You can download the FIS template response here
Please do send us your response so we can factor in any additional points to the core FIS input on this. Thanks for your support – together we are stronger.
Iain McIlwee
CEO, Finishes and Interiors Sector
PS Through this process we are always looking for feedback on our Procurement Research recently completed with the University of Reading that may help you with your response.
PPS For support in managing your contractual responsibility, including the new Best Practice Guide that FIS has helped develop with the CICV in Scotland and standard Terms and Conditions launched in 2023.
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