“One thing that concerns me greatly is the level of business failures in the industry during 2021, particularly in England and Wales ”
By Len Bunton
FRICS FCIArb, HON FRIAS
R
Contract Expert
eflecting on the events of 2020 and 2021, are we seeing much change for the prospects of the construction industry in 2022? Well one thing that concerns me greatly is the level of business failures in the industry during 2021, particularly in England and Wales where some big players have gone – some turning over £85 million per annum.
I recently saw the figures for a development company that was in administration and the level of money owed to creditors was a mind-boggling £68 million, with amounts due to individual organisations ranging from £12,000 to £450,000. With such horror stories in mind, now more than ever, my advice to SELECT Member businesses would be to keep a focused eye on your payments and cashflow and don’t let the level of your debt get out of control. I’m seeing an increasing number of situations where my own client base is continually chasing a contractor for payment for work, with the result that they end up saying: “We won’t work for that lot again.” Since the pandemic started, there has been much talk within the industry about the need for change and “we can’t go back to the way we have operated for years”. I agree with that, but getting major change to procurement strategies, tendering procedures and low-ball tendering is a huge issue and we await the publication of the Construction Accord by the Scottish Government shortly.
So what’s the solution in the meantime? Well, I hope that SELECT Members will see the benefits of project bank accounts (PBAs) which will have a significant impact on the timing of your monthly payments. A great deal of material on the subject is available on the CICV website at cicvforum.co.uk and if you need advice then SELECT can also assist you. My view is that all public sector construction projects should have PBAs and there should be no financial threshold. My second piece of advice is also dear to my heart and one that I feel is more important than ever – the Conflict Avoidance Process (CAP). As you’ll know, I’ve authored many articles about CAP for CABLEtalk in the past two years, emphasising its importance, and would I continue to encourage all SELECT Member organisations to read up on it and sign the Conflict Avoidance Pledge. This will allow you to have issues addressed at the earliest possible stage, before they escalate into a dispute, and also to find a way through any current payment issues. Again, if you need assistance then the SELECT team can help you to find out more. So, to summarise and I will not pull any punches – it is up to the industry to press ahead with implementing PBAs and CAP. The talking is over and the benefits have been explained. All I will add in conclusion is that moans and groans about payment can be resolved by actively supporting these processes.
CABLEtalk
FEBRUARY/MARCH 2022
51