The legal year ahead in construction

The new year begins with our much-delayed withdrawal from Europe. That much is certain, to the relief of many. Nevertheless we remain largely in the dark about what our relationship with our closest neighbours will look like. The hard negotiations on our future trading relationship are yet to be done. So this is only the first step towards certainty for business. 

So with Brexit behind us, what else does 2020 hold for the construction industry?

Last year saw considerable change to the Building Regulations regime post Grenfell, noticeably a change to the wording of Approved Document B following the ban on the use of combustible cladding in high-risk buildings over 18m. This year is likely to bring more changes: the ongoing consultation on sprinklers and other fire safety measures is likely to lead to further amendments. It is also likely we will see the appointment of a new Building Safety Regulator, the introduction of duty-holders responsible for the safety of high-rise buildings, and new ‘“gateway points’” at which duty-holders will have to show the regulator that all safety and building regulations have been complied with. In short, there will be a new and more robust regime focused on occupier safety as the priority, which the industry must take on board.

Businesses have already been encouraged to begin implementing the recommendations made to date, before any new legislation is introduced. The industry will invariably have to consider the practical implications of these changes, in particular employee training, the recruitment of a building safety manager to take on the role of duty-holder and, not least, the associated cost. It should be remembered that there will be large fines and possible criminal sanctions for non-compliance, as well as the prospect of being “named and shamed”. The industry would be well advised to consider implementation of the required changes within their business and to set aside the extra funds required at an early stage. 

The spotlight and public scrutiny will be on how we procure, design and construct building projects in the UK

The year will also see the publication of the phase 2 report of the Grenfell public inquiry, which will largely focus on the design and construction of Grenfell Tower. The phase 1 report has already identified failures in respect of compliance with the Building Regulations – it remains to be seen what conclusions the chair will draw from Phase 2, but the spotlight and public scrutiny will be on how we procure, design and construct building projects in the UK. 

Post Grenfell there has already been a sharp rise in claims to recover the cost of remedial works under building contracts, appointments and warranties. We have seen a domino effect when it comes to claims – buildings scrutinised to such an extent that discovery of one defect leads to another, and another, and so on …

A useful byproduct of the shenanigans in parliament and the election frenzy has been the promised spending on infrastructure. This is much needed at a time when we have reports of the biggest fall in new work in more than a decade and a surge in construction insolvencies. Our newly re-elected prime minister has promised infrastructure spending in the billions, with much of this directed to the North and the Midlands. Let us hope the election promises come good and that the industry can respond – without the reliance it was able to place hitherto on European skills and manpower. 

The predicted claims against the industry will continue to affect the availability and cost of professional indemnity insurance. We have already seen a hardening of the insurance landscape. Some insurers have exited the professional indemnity market altogether; others are no longer providing cover for certain types of claims. The result is less competitive rates, higher premiums and larger excesses. Industry professionals should consider how they can best pass on these additional costs to employers and should also ensure that any contractual terms agreed do not contain any obligations over and above those covered by their professional indemnity insurance. Terms of appointment should reflect the insurance policy terms; if they do not, businesses are at risk of collapse. This will further fuel the industry’s woes and do little to reverse the current spate of insolvencies.

Increased use of construction and project management software, robotics and green technology should all contribute to a smoother construction pathway, with less conflict and less cost

On a more positive note, 2020 may well see further proposals in relation to retention payments on construction contracts following the abandonment of the Construction (Retention Deposit Schemes) Bill, otherwise known as the Aldous bill. The imposition of financial safeguards and additional payment security would be good news for the industry in general, but particularly for smaller construction companies. We need more of a focus on the challenges of doing business and more initiatives that help supply chain delivery from all corners of the industry and by the associations that represent those corners. 

The industry is also likely to see an increase in the uptake of digital solutions. Increased use of construction and project management software, robotics and green technology should all contribute to a smoother construction pathway, with less conflict and less cost. This year too a revised BIM Protocol reflecting current international standards is on the cards.

A new year. A new decade. A new future!

Sheena Sood is a senior partner at Beale & Company Solicitors