06 December 2017 #Construction
With 2018 fast approaching, we look back at five key things we think have shaped the past 12 months for both the industry and construction law.
As the implications of Brexit continue to loom on the horizon, the future of the construction industry has been brought into sharp focus. The situation has been given even greater impetus by the Construction Industry Training Board. They revealed in June that a third of construction firms employ overseas workers. This compounds the skill shortage in the sector, recognised in November’s Autumn budget. Mr Hammond announced £204m of funding for innovation and skills in the construction sector.
The Office of National Statistics noted in October that construction was in a technical recession. This followed three consecutive periods of decline in output as a proportion of GDP. There has been a modest improvement according to a more recent report from the purchasing managers index. It’s hoped that the recently announced stimulus package for house building and infrastructure will lead to continued improvement.
There have been various calls this year to get the industry to step up and become ‘future proof’, more productive and enterprising. Key features of this include harnessing digital technologies and off-site construction. In July 2017, the government responded to the Farmer Review 2016: Modernise or Die. More recently in November 2017, the government launched a new industrial strategy. The Construction Leadership Council now has its own website at http://www.constructionleadershipcouncil.co.uk/. It aims to focus on three core areas: digital strategy, procurement and operation. This trend will no doubt continue into 2018.
The fire at Grenfell Tower in June 2017 was a stark wake-up call to many, dragging the industry into the public eye and under the government’s attention. The swift announcement of a public inquiry in August 2017 chaired by Sir Martin Moore-Bick was followed by the establishment of various industry and expert led groups to tackle issues of building safety. Government advice for building owners followed (https://www.gov.uk/government/collections/grenfell-tower). An independent review of Building Regulations and Fire Safety was also announced in August 2017 led by Dame Judith Hackitt. The public inquiry and independent review are expected to report back in 2018.
Perhaps the standout case of the year, or at least the most discussed (by lawyers), was MT Højgaard v E.ON. After a lengthy battle through the courts, the Supreme Court upheld a fitness for purpose obligation. This was despite its apparent inconsistency with a separate obligation to comply with a defective industry design standard. In effect, the contractor was required to comply with and make sense of various design obligations imposed upon it at different points in the contract. A link to our article is here - 'Are your contractual design obligations fit for purpose? – important new law'. The key take-home is to always be sure of your design obligations. It’s also critical to remember that courts will focus on the natural meaning of words when assessing contract clauses.
The array of other key cases is too extensive to discuss in detail here. However, through the following links you can read our articles on:
In October 2017, the government announced consultations on the use of cash retention and 2011 changes to the Construction Act. These close on 19 January 2018 and after submitting our responses, we look forward to reading the findings next year. In particular we are interested in the outcome of the consultation on cash retention. A new bill is to be read in parliament in January, setting out new rules for managing cash retentions. The bill is being backed by industry bodies such as BESA and ECA.
Finally, it’s been a busy year for the publishers of some of the most commonly used contracts in the industry. JCT completed the release of its 2016 suite, and the launch of NEC4 followed shortly after. Industry response has mostly been positive, and we have seen significant uptake of the new JCT contracts amongst our clients. If you would like to know more, you can still listen to our JCT 2016 and NEC4 webinars for an overview of the key changes introduced.
Not to be left out, FIDIC confirmed the official launch of its highly-anticipated 2017 suite of contracts at its Contract Users’ Conference in December 2017.