Shortages across the construction industry have been widely reported in recent months compounding expected labour scarcities. While lack of plaster and plasterboard is apparently easing, bricks, sand and steel are still in short supply placing pressure on prices. The Builders Merchants Federation has specifically noted a shortage of plumbing and roofing materials, and timber. Parties also point to difficulties getting hold of power tools, screws and fixings, even onsite welfare facilities.
It is difficult to pin-point a specific cause, but various issues have been identified by commentators:
- Factory closures during the first UK lockdown leading to pent up demand, coupled with reduced output since due to new, safer processes allowing for social distancing.
- Local coronavirus restrictions affecting output of overseas manufacturers.
- The impact of Brexit, be that issues with paperwork or a hesitance to trade with the UK due to perceived ongoing issues.
- A shortage of shipping containers because of congestion at the ports, leading to a significant increase in the price of shipping. While this was beginning to ease, the blockage of the Suez Canal has placed renewed pressure on this supply.
- Large infrastructure projects, particularly HS2, monopolising supply that is available.
- Certain materials, such as timber, are simply experiencing a global lack of supply. Other countries are prepared to pay more to secure their supply, pushing the UK lower down the pecking order
Adding to the mix, recruiters have warned that the cost of labour is also increasing, due to a fall in EU-born workers coming to the UK following Brexit. Alternatively, it could just be that current challenging market conditions have been caused by and contributed to a perfect storm of a combination of the above factors. In any event, the above demonstrates the difficult backdrop under which the construction industry is now operating.
The Construction Leadership Council’s Product Availability work group, tasked with monitoring the situation, recently issued a statement in which it suggests availability issues are likely to worsen before they improve. It recommends that all users should plan for increased demand and longer delays, keep open lines of communication with their suppliers and order early for future projects.
We expect to see an increase in contractual disputes over the coming months. Contractors may be unlikely to be able to deliver works at prices previously quoted. Delays on materials outside the contractor’s control will likely have an impact upon the progress of works. The terms of the contract are likely to dictate which party bears those risks, and there are likely to be contractual mechanisms dealing with the circumstances in question. For instance:
- Is there an early warning system employed under the contract such as in the NEC suite? Is there an obligation on the contractor to give prompt notifications of issues, and has that been complied with?
- Does the contract provide a mechanism to claim additional time or money? Can the current circumstances be deemed to fall within it?
- Does the pricing mechanism allow for re-valuation, or a share in the pain/gain on the project?
Failing the above, if the situation is entirely untenable, can a frank, commercial discussion between the parties enable them to reach a solution suitable for all?
We think it is important to bear in mind that the current problems actually reflect an innate triumph in the UK construction industry. It has continued to operate, safely and effectively, through incredibly difficult times. It has flourished and seen an increase in demand which is unfortunately now adding to the current issues faced. It is, essentially, a victim of its own success. It seems to us that parties must collaborate with each other to ensure that those issues aren’t felt more keenly by some more than others, and that the industry can continue to capitalise on its success. History tells us that failures at any level of the chain cause shockwaves that affect the rest of the industry.