GOVERNMENT URGED TO HELP SAFEGUARD CONSTRUCTION INDUSTRY
22nd June 2020
Roddy Cormack, Accredited Specialist in Construction Law at Wright, Johnston & Mackenzie LLP, is calling on the government to come to an agreement with industry professionals to stop a potential domino effect of insolvencies for contractors as social distancing measures are enforced.
Roddy said: “The construction industry is facing a real uphill struggle. Although some restrictions are lifting, further increasing the work that can be carried out on sites, working practices are going to be drastically different for the foreseeable future as a result of social distancing. This means the prices agreed for work prior to the pandemic will no longer reflect actual costs in most cases.
“The number of workers that can be on site at any one time is now likely to be substantially lower than before the social distancing requirement. Therefore a quote that was originally based on ten men completing a job, for example, may no longer be enough if only five men can carry out the work – it may take longer and could lead to discrepancies in costs.
“We could find ourselves in a situation where contractors simply cannot afford to complete projects, and clients may need to pay extra and won’t necessarily have the funds to do so. Whoever has the best negotiating position will come out on top. If those who are in the stronger position are allowed to take full advantage of the situation, they’ll be the ones who survive.”
Roddy believes statutory government intervention could be a way of levelling the playing field and ensuring more contractors and construction professionals are able to weather the storm.
He explained: “There are a few routes the government could take in my opinion. One option could be to impose a mechanism for dealing with loss and expense claims. A formula for how claims should be dealt with and valued could be imposed on contracts.
“Of course, some people may lose out and some may profit from this, but if it’s set at the right level it could do a lot to help even things out, and bring some kind of stability.
“Another option could be offering grants or loans to employers to fund the additional expenses being added to contract sums. Employers could choose whether to take up the funding, but would still be free to argue the liability for the additional costs if they consider the contractor’s claim to be unfair.
“Finally, the regime for payment could be made even more rigid and uniform, so the scope to delay or avoid payment is restricted and any dispute about the amount due is more quickly identified.
“We can’t expect the government to solve all the problems created by coronavirus, and such schemes could cost billions, but a lack of intervention could put the construction sector in Scotland on its knees, which would be far more damaging in the long term. There’s no easy solution, but it’s evident we need to find a way forward that is sustainable for all parties.”
The information contained in this newsletter is for general guidance only and represents our understanding of relevant law and practice as at June 2020. Wright, Johnston & Mackenzie LLP cannot be held responsible for any action taken or not taken in reliance upon the contents. Specific advice should be taken on any individual matter. Transmissions to or from our email system and calls to or from our offices may be monitored and/or recorded for regulatory purposes. Authorised and regulated by the Financial Conduct Authority. Registered office: 302 St Vincent Street, Glasgow, G2 5RZ. A limited liability partnership registered in Scotland, number SO 300336.
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