The latest effects of the Coronavirus Covid-19 pandemic on the UK and worldwide construction industry

What we should all be doing in response.

Posted 24/3/2020 at 10.30 am

The coronavirus pandemic is affecting the lives of people right around the world in a way that has most probably never been seen before.

Construction businesses the world over are doing their best to change the way they work in order to accommodate regular updates in national government advice and to keep construction workers staff and the general public safe. Should construction sites be closed?  Should governments be insisting that they close?

Within the frame of regularly changing health and safety guidance, construction companies are attempting to minimise or at least limit the disruption to their construction site productivity and to ‘office based’ construction functions while they are in reality being performed remotely from home.  Construction companies of all types and their specialist supply chain, including construction recruitment consultancies and agencies like Maxim, are inevitably considering the impact of coronavirus on their business and implementing changes and adjustments on a ‘best information available’ basis.  Governments and employees in the construction industry around the world are also making decisions as we speak that will have effects both short term and long term that will impact jobs and social life in our own country and all around the world.

At 8.30pm on Monday 23^rd March, the UK Prime Minister effectively ordered a ‘lock down’ telling people in the UK to stay at home.  However, as we write this blog, we understand that there is no requirement for all UK construction sites to close.

Despite everyone’s best efforts to mitigate Covid-19, the outbreak is inevitably going to have a massive impact on the construction industry worldwide. The severity of the impact can partly be seen already but the duration of the impact and ultimate severity remains to be seen.  It will become much clearer in the coming weeks and months and will likely vary by country around the world.

The basic observations below relate to some of the current issues we have observed being debated in the UK construction industry by lawyers, claims, delay and dispute experts. Maxim is a recruitment agency specialising in recruiting such construction industry professionals thus we cannot offer advice or guidance ourselves.  For legal and contractual advice we recommend you contact a suitably qualified construction lawyer or experienced claims, delay or dispute professional. 

Following this section, we will discuss the construction industry supply chain, and conclude with making a few final points about our professional and personal duty to behave responsibly in these exceptional times; this crisis affects not only construction but affects the lives and well being of almost everyone around the world.

Force Majeure

The direct effect disruption to projects will have on consultants, contractors and sub-contractors and vitally their employees, can begin to be understood from looking at their contract to see if and how they can be granted extensions of time based on recent events. 

The phrase Force Majeure was probably an obscure legal term to ‘the man in the street’ before this pandemic started, but we will be hearing a lot more of it in connection to a range of stalled activities from construction projects to cancelled flights and holidays.  A starting point for many companies in the construction industry will be to establish whether Force Majeure is a clause that is included in contracts they are a party to. 

The general consensus on the advice for contractors and subcontractors looking to claim in relation to Force Majeure seems at the current time to be:

1. Demonstrate that a Force Majeure event has occurred, which has been out of your control
2. Clearly demonstrate how this has hindered and delayed your ability to deliver the project
3. Provide evidence that you have taken all steps to mitigate the effects of the event

For specific advice relating to your contractual entitlements and how you can correctly submit a claim, you are advised to speak to a specialist. Many are warning that regardless of your entitlement, if your claim is not submitted in a timely fashion or is adequately prepared, you may end up not getting the perceived entitlement/s you were anticipating.

If it was Force Majeure, is it still Force Majeure now & in the future?

For a number of reasons there can be debate as to whether specific scenarios relating to the coronavirus outbreak can be classed as a Force Majeure event in the early days of this pandemic. In the last week, the consensus does seem to be that many early stage scenarios will be seen and progressed to conclusion using this approach.

However, one contractor we have spoken to about this is learning from the situation we now find ourselves in, and will be including specific references to the Coronavirus / Covid-19 in future contracts or even seeking to amend contracts with their subcontractors to include this provision.

Whilst many of the standard forms of contract currently cover the coronavirus pandemic indirectly (for example, via Force Majeure), it could be imagined that future standard contract templates and construction forms of contract will make specific reference to coronavirus / Covid-19 in the future to make it clear as reasonably and practically possible how such complex and changing variables will thereafter be dealt with.

It can be noted even now that the NEC and JCT forms of contract for example will, in keeping with their different approaches to contract administration, diverge in certain ways in their guidance and frameworks for the handling of the unchartered territory of construction in a currently open-ended period of coronavirus disruption.

Supply Chain Worries in the UK Construction Industry

It is fair to say that on-site construction would be severely affected if the government decided to escalate the newly imposed current UK lock-down to include all construction sites as we have seen happen in other countries around the world.  Whilst office-based staff have the inconvenience of working from home and switching face-to-face meetings to video conferences, the effects of a shutdown to on-site construction would by definition bring live projects to a complete standstill and create massive additional financial, contractual and social and employment challenges.

In turn, this would have an additional huge impact on the whole construction industry supply chain, affecting many layers of direct and indirect businesses relating to the construction industry. This supply chain consists of large numbers of SMEs and self-employed workers.

Build UK and the Civil Engineering Contractors (CECA) were just two of the construction bodies to put out a statement last week (already a long time ago?!) setting out advice, guidance and a general plan of action moving forward, which included:

• Calling for prompt clarification from public and private sector clients with relation to their contracts positions in relation to Covid-19
• Advising their members to keep lines of communication open with their suppliers and ensure payments are up-to-date
• Asking the government to identify safety-critical work on the infrastructure network that is essential and must be continued and confirm arrangements and prompt payment for the work
• Asking members to clarify their position over suspensions of any works
• Identifying if any activities can continue remotely or be brought forward
• Ensuring projects are ready to recommence work as soon as possible

Maxim consultants are keeping in regular contact with our loyal client employer company contacts, and the mood at the current time we feel is nervous, perhaps a little fraught but generally positive that the current unprecedented scenario will pass and that the timeframe for this will become clearer before too long. However, many did concede that their ability to perform in their role within live and planned civil infrastructure and construction projects was ultimately dependent on factors out of their direct control at the current time.  This is not a desirable position to be in in terms of risk management, loss mitigation and contractual entitlement.

A common concern for some businesses that we have spoken to did seem to be the issue of payments. To state the obvious, there is a reasonable expectation, and to a degree a reliance upon contracted services still being utilised where possible, and secondly that payments for services contracted and provided (or reasonably expected would be provided) would be made in a timely and reasonable manner.  The continuity of payments would ensure that the whole construction supply chain will be able to fulfil each of their obligations to pay their own staff and their suppliers and employees further down the supply chain. This is without doubt in the interests of everyone.

This is not a global construction industry recession with the origins or character of the Global Financial Crisis, the effects of which were deeply felt by governments, businesses and individual people between 2007-2010 and beyond.  This is an exceptional event from which almost all businesses and jobs can reasonably hope to recover from relatively quickly, given one essential factor – that we and our families, friends, colleagues, the people working in the construction industry and the rest of society are safe and well and able to participate in renewing it again.

In order for this to happen, and as a priority over any short-term money making or saving opportunity guided by personal selfishness, we believe that two pieces of advice can clearly be followed to help the current situation pass as quickly and safely as possible for everyone’s benefit and wellbeing:

1. Follow all government guidance, including in relation to ‘social distancing’ and all measures designed to keep people safe. Do not work anywhere within the construction industry at the current time that goes against this basic safety necessity.
2. Practice Forbearance. The contractual law and related rights and entitlements espoused by construction lawyers and claims, delay and dispute experts are fine and have their place, of course they do, but they are not the only consideration in times of unprecedented crisis.

The heroes of the current situation will be those decision makers that are in a position to be able to choose to ignore legal and contractual advice and take action or permit inaction that allows health and safety of people to be the primary concern.  Decisions that allow jobs to be preserved and payments to be made to those in need without legal or contractual obligation behind them.  We have a number of client employers following through with their moral obligation to employ new staff who have resigned their previous jobs in order to join them and we applaud them in doing so despite the on boarding and induction procedures for new staff being challenging in the current circumstances of needing to work from home.

Opportunity: Daring to look to happier times

If doing the right thing where you can is not enough of an incentive in itself, there is the prospect of Coronavirus disruption all being over, or at least under control enough for a normal life and normal construction activity resuming.  This prospect offers a fantastic incentive to be ready to take advantage of the huge opportunities for growth and job and economic security as we come out the other side of this.  We are hearing first hand that this is something recognised by construction companies of all sizes and operating at all stages of the construction process. 

To all our employers, candidates, placements and to the construction industry as a whole in the UK, Hong Kong, Canada and worldwide, let’s keep our heads, let’s keep each other safe, let’s look after the supply chain and let’s work together to get through these unprecedented times together.

Steve Thomas
Construction Recruitment Director, UK & Canada
LinkedIn: https://www.linkedin.com/in/maximrecruitment/
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Stuart Hackett
Senior Recruitment Consultant, UK
LinkedIn: https://www.linkedin.com/in/stuarthackett/