President’s Column: March 2020
Sorry to start on a gloomy note, but I’m dismayed to read on a regular basis that main and specialist contractors are going under or in difficulty. These are long-standing companies whose expertise and skills are a great loss to the construction sector, at a time when skill shortages are becoming more obvious and when we need to attract a new and more diverse set of people into the industry. This mirrors the economic uncertainty and challenges of recent times with a softening in activity and delays in investment for large construction projects. Looking back to the start of 2018, the steel sector and others warned the Government about “the Carillion effect”; that the true ripple effect on the industry as a whole would not be felt until 12 to 24 months down the line, I think we are seeing this play out now.
We must focus on financial due diligence, good housekeeping and contract management. We must stand back on receiving an enquiry and think about whether we want to work for that company. What is the financial standing of my client, perhaps I can get advance payments, offer a retention bond or have monies set aside in trust in an escrow account or project bank account? Can I get credit insurance for the main contractor (and if not, why not?) Who is the main client on the project? When are payments due? Will payments flow through properly and when will my retention be released? These are the sort of questions and assessments for a go/no-go decision and it’ll probably avoid having to face the aggravation of sorting it out after cash has left the business.
BCSA members can of course take advantage of free legal and commercial advice as well as the trade association lobbying government and industry on their behalf on the commercial issues they are facing.
On a brighter note, over 3% growth is forecast in the steel sector for industrial buildings in 2020, and over 6% in commercial offices. Annual increases are anticipated and the total UK consumption of structural steelwork is expected to grow to 925,000t by 2022, with power and infrastructure making significant contributions to the sector.
The Conservative Party made quite few promises during the General Election campaign about regeneration and infrastructure projects, it’s time to deliver on these promises. I’m encouraged to see a clearer focus on our industry. The Construction Sector Deal, and the Crown Commercial Service are now rolling out the Framework for Construction Works and Associated Services across both central and local government departments and healthcare trusts. Although I think it’s a missed opportunity not to mandate the use of project bank accounts.
The steel sector is (always) well-placed to take advantage of new opportunities in the private and public sector, particularly around offsite manufacturing. The need to balance offsite manufacturing, carbon reductions and total asset lifecycle costs has moved up the agenda.
Independent studies consistently show that steel is the most cost-effective framing solution for multi-storey construction in the UK market. Steel-framed buildings can be easily adapted and avoid costly and environmentally harmful demolition and redevelopment. Its inherent adaptability and flexibility also mean that future changes or extensions – even vertically – can be carried out with minimal disruption and cost. Steel isn’t a cost, it is an investment.