On Episode 2 of the Helix Essential Series, Michael Chesterman spoke with Helix’s very own Sarah Shirley. Sarah Shirley is a Senior Associate at Helix Legal and is currently living and working in the UK.
In this episode, Sarah and Michael discussed a range of industry issues and compared notes on the similarities and differences in terms of what is happening in the UK and Queensland.
What is happening in the UK and how is it different to AUS?
Throughout the episode, Sarah informed us of the devastating effect that the pandemic has had in the UK. She noted that at the time, in a week where Australia had seen 96 total deaths, there were up to 900 deaths per day in the UK.
Like Australia, construction has remained ‘essential’ in England and Wales throughout the COVID pandemic. However, construction was deemed to not be ‘essential’ in Northern Ireland and Scotland.
Sarah explained that in Northern Ireland and Scotland there were certain circumstances where construction would be considered ‘essential’. For example, in Scotland, a project to create or repurpose facilities which will be used directly for COVID-19 related activities was considered ‘essential’.
In England, reports from BuildUK at the start of June indicate that 97% of construction sites are operating again, although productivity is still at most 85%.
Construction sites in Scotland have only just been given the green light to reopen 3 months after the UK went into lockdown in March. This is a very welcome relief for those businesses who solely operate in Scotland. Shortly after the announcement to reopen sites, 21% of sites are operational at 27% productivity.
Industry bodies in UK actions and protections
In the UK, the construction industry bodies have been pushing for construction to continue as much as possible since the very beginning of the pandemic. Public Health England is constantly updating its guidance on social distancing measures to be implemented by businesses. The Construction Leadership Council has been publishing and updating Site Operating Procedures to provide guidance specific to the construction industry.
Interestingly, Sarah observed contractors have been utilising technology to comply with social distancing requirements in the UK. One of the examples that Sarah mentioned was contractors wearing sensors that alert them when they are too close to another contractor.
You can hear the other ways contractors are utilising technology on construction sites overseas here:
With the added safety requirements and COVID-19 guidelines, we predict that the utilisation of technology in construction sites will increase and will cause technology disruption in the industry to accelerate.
A survey undertaken by software specialist Procure Technologies in the UK showed that 66% of companies have implemented one or more forms of new technology since lockdown in March.
Like the construction industry in Queensland and the rest of the world, construction companies in the UK have been struggling with cash flow and are concerned with the possibility of a rise in disputes as a result of the pandemic.
As a response to this, RICS, the industry leader in the UK, introduced a conflict avoidance pledge which encourages businesses across the UK to come together, negotiate a resolution and reach commercial agreements before inundating the court with disputes.
When an organisation signs this pledge, they make a commitment to work proactively to avoid conflict, facilitate early resolutions of potential disputes, use conflict avoidance measures, promote collaboration and identify, promote and utilise conflict avoidance mechanisms.
In Sarah’s view, disputes hinder the construction industry. A conflict avoidance pledge helps to reduce the number of disputes and keep the industry moving forward in the emerging post-COVID world.
Sarah also discusses the importance of using regulation pathways like lodging formal complaints as a last resort. In Sarah’s opinion, it is important to communicate first.
A major issue that many construction businesses are, or have been faced with, particularly in the early days of the pandemic, is the conflict between meeting contractual obligations and deadlines and protecting the health and safety of the workers.
Unless a different agreement has been made, the obligation to comply with the contract requirements still stands.
Although COVID-19 affects the entire population, it cannot be assumed that the contract requirements and deadlines are eased or lifted. It is important to communicate with your client and inform them if the outbreak is having a particular effect on you and your ability to comply with the contract.
Sarah informed us that with the government enforcing social distance measures, there is more guidance and clarity for businesses to be productive and safe. She also notes that even if on an interim basis, most people are collaborating and having a commercial discussion about the contract and their contractual obligations, which helps keep the contract running.
The Pathway to Recovery
The UK Government has made it very clear during the pandemic that construction and infrastructure is essential to the UK and its economy.
In addition to this, the UK Government has taken the initiative to encourage public sector clients to pay quicker, advance payments and release any retention being held; as well as relax the rules on procurement to keep constructions running.
In the month before lockdown, the UK Government announced billions of pounds of investment in construction and infrastructure projects across the UK. Last month, the Government further announced its National Infrastructure and Procurement Pipeline into 2021 anticipating procurement of £37 billion. In June, Prime Minister Boris Johnson also announced his plans to implement a new Infrastructure Delivery Taskforce for the acceleration of government infrastructure projects.
In light of the current situation, there is potential for insolvencies in the construction industry to rise. Several larger contractors in the UK have gone into liquidation over the last couple of months, which, according to Sarah, this isn’t particularly out of the ordinary.
Temporary relaxations have been introduced to prevent businesses from trading insolvent during this time.
On the 22nd March 2020, the Australian Federal Government announced the introduction of several new measures to provide relaxations for the Corporations Act 2001 (Cth) and temporarily relief for financially distressed individuals and businesses in light of the economic challenges businesses are facing due to the COVID-19 pandemic. These temporary reforms are contained in Schedules 8 and 12 of the Coronavirus Economic Response Package Omnibus Act 2020 respectively.
You can listen to Michael and Sarah’s full discussion about insolvency in the construction industry here:
If you would like to hear from our conversation with Sarah, click here to view our full playlist of clips on the Helix Legal YouTube channel.
We have also uploaded each episode of the Series to date on our channel for you to re-watch anytime.
Michael Chesterman goes live on Facebook and Zoom every Wednesday at 4:00 pm on the Helix Essential Series. To tune in for future episodes, visit the Essential Series page on our website for our upcoming guests and topics.
Not intended as legal advice. Read full disclaimer.