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JULY 2018

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Mental Health in the Construction Industry

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GRENFELL REVIEW CALLS FOR SYSTEM OVERHAUL THE IMPLICATIONS OF BREXIT FOR UK CONSTRUCTION


OFFICIAL MEDIA PARTNER


WELCOME to the latest edition of UK Construction Excellence.

payments are putting on businesses. The shockwaves sent through

Following the collapse of construction

that suicide is more likely to kill a construction worker than a fall from

Carillion’s 30,000 strong supply chain

height. With all the hype surrounding

giant Carillion, the industry has been in

are still being felt, and industry leaders

CDM regulations, will it be long before

turmoil. Finance and legislation are the

are looking for answers. As the Aldous

we see mental health regulations too?

hot topics around the board room table

Bill gets its second reading, the industry

and protecting the supply chain is of

awaits the verdict on the practice of

industry about how to tackle the

utmost importance.

payment retention, and in this issue we

problem and how just talking to your

examine the current state of affairs.

colleagues and employees can make all

This month’s issue looks at some of the important legal issues surrounding

Mental Health discussions are also

the industry, from how Brexit will affect

on the rise in the industry. Recent

Health & Safety law, to the stress late

figures point to the shocking statistic

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We speak to figures within the

the difference. Victoria Maggiani

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LATE PAYMENTS PUSHING SMES TO THE EDGE

VARIATIONS IN WRITING? CHANGE THE RECORD PLEASE, PETER!

19 SCOTTISH CONSTRUCTION COLLATERAL WARRANTIES: TIMELESS, OR ON BORROWED TIME?

Publications Editor Vicky Maggiani

Head of Content & Client Services Sandra Peet

Designer Seamus Norton

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NEWS

GRENFELL REVIEW CALLS FOR SYSTEM OVERHAUL After ten months of intense investigations, Dame Judith Hackitt has released her report on the Grenfell Tower tragedy. Chair of the independent review launched into Building Regulations and Fire Safety, Dame Judith has recommended a fundamental reform of the building system in order to improve building safety and rebuild trust in the safety of high-rise properties. Much to the surprise of many within the industry, the report has fallen short of calling for a total ban on flammable cladding. The review looked into the design, construction and management of buildings in relation to fire safety, and has concluded that the regulations and guidance for construction are in themselves “ambiguous and unclear” and that the systems for testing and certifying products are “disjointed, confusing, unhelpful and lacking any sort of transparency”. Dame Judith said that the system needs a complete overhaul, with the construction industry needing to take responsibility for the delivery of safe buildings. “This is a systemic problem,” she says in the report. “The current system is far too complex, it lacks clarity as to who is responsible for what, and there is inadequate regulatory oversight and enforcement. Simply adding more prescription or making amendments to

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the current system, such as restricting or prohibiting certain practices, will not address the root causes.” In a damning remark on the industry, she notes: “[these] issues have helped to create a cultural issue across the sector, which can be described as a ‘race to the bottom’ caused either through ignorance, indifference, or because the system does not facilitate good practice. There is insufficient focus on delivering the best quality building possible, in order to ensure that residents are safe, and feel safe.” The full review builds on the interim report, released in December, which showed the failings in the current system and set out six key areas for further work. It sets out an ambitious vision for a new framework which will improve standards for both new and existing buildings. Recommendations from the report include: • A new regulatory framework for buildings over ten-storeys • Holding developers and building managers responsible for fire safety • The creation of a new body to ensure the management of safety risks • Clearer roles and responsibilities for duty holders • A better testing regime plus better labelling and product sourcing • More effective procurement prioritising high safety and low risk

rather than cost Nick Baveystock, Institution of Civil Engineers (ICE) Director General, said: “The review makes the important point that we must begin thinking of buildings as a system. The UK’s infrastructure sector has recognised this, and is leading the way in adopting Building Information Modelling. This approach has changed the way in which we look at the whole life of an asset, by modelling and recording aspects of this complex system in a digital version.” Brian Berry, Chief Executive of the Federation of Master Builders (FMB), commented: “[The] report is the culmination of a long and thorough review into the weaknesses of the current approach to competency and compliance in the sector, weaknesses which can serve to undermine safety. It is a suitably serious response to the Grenfell Tower tragedy. Dame Judith has understandably focused the attention of the review on highrise residential buildings, but we believe strongly that some of the recommendations must be taken as a blueprint for the wider industry. In particular, the industry as a whole needs to develop a comprehensive approach to competence. There is an opportunity here for the whole industry to step up and ensure we have adequate levels of competence across the sector.” Survivors and bereaved of the


Grenfell blaze have said they are “saddened and disappointed” that the call to ban combustible cladding products has been ignored. On the day the review was released, the 2018 FM Global Resilience Index revealed that the UK ranks 34th in the world when it comes to resilience to fire. The UK is currently less resilient to fire-risk than countries such as Greece (10th), Poland (13th), Turkey (17th), Russia (21st), Bulgaria (24th) and Bosnia and Herzegovina (26th). It is also some way behind other developed nations in the EU. The fire-risk quality score takes into account the quality and enforcement of a country’s building codes, along with a measure of the fire-risk quality of actual facilities visited by FM Global’s property risk engineers. Tom Roche, Senior Consultant for International Codes and Standards at FM Global, commented on the findings of the Hackitt Review: “While the Hackitt Review provides some clarity over who is responsible for what and when, it’s disappointing not to see a direct call for current technical guidelines to be reviewed. Instead, it looks like the Government will be pushing more responsibility onto industry to ensure building safety. Pushing responsibility onto industry without issuing updated technical guidance is likely to create further

confusion for building owners who are typically looking to government guidelines and building standards to make sure they are compliant. Hackitt also falls short of calling for a ban on combustible materials, again pushing the responsibility onto industry to trace and test materials. Without any bans in place, it’s even more imperative that the Government takes responsibility for updating technical guidance for the industry to use. “Hackitt’s report focuses heavily on high-rise residential buildings. No doubt this is an important area post-Grenfell. However, Grenfell exposed multiple failings across the UK’s fire safety systems that were not just specific to high-rise buildings. When it comes to fire safety, we need the same level of rigour to be applied to all buildings, including homes, schools, hospitals and workplaces, many of which are low-rise buildings. “What is clear from this review is that rather than waiting indefinitely for the Government to provide answers, building owners need to get ahead of the issues and have a fire safety strategy in place. If there’s a material they are unsure about the safety of, they shouldn’t delay for the Government to make recommendations; they should get it looked at now.” In anticipation of the review, the Government has announced it will fully fund the removal and replacement

of unsafe cladding by councils and housing associations. In a move estimated to cost some £400M, the Government will ensure non-profit-making local authorities and housing associations will be given access to funds to help with reasonable costs of removing and replacing unsafe cladding from buildings which they own to ensure people are safe in their homes. The fund follows the Government’s offer last year of financial flexibilities to assist local authorities with essential fire safety work. Interim safety measures are in place in all affected buildings and latest figures from the Ministry of Housing, Communities and Local Government show that over 65% (104 out of 158) of social housing buildings with unsafe cladding are currently going through the process of remediation. Housing Secretary James Brokenshire said: “People must always feel safe in their own home. “Since the tragic events at Grenfell Tower, we have taken steps to ensure the immediate safety of all high-rise buildings. “This money will ensure local authorities and housing associations are being given the support they need to get this work done now as well as removing the uncertainty around funding.”

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NEWS

LATE PAYMENTS PUSHING SMES TO THE EDGE New research from the Prompt Payment Directory (PPD) has revealed that late payment practices are pushing small construction firms to the brink of bankruptcy or liquidation. On top of this crisis for the building industry, the research also suggests that the practice is contributing to rising numbers of construction business owners suffering from depression, anxiety, stress and ‘extreme anger’. Research commissioned by PPD, a payment rating website for businesses, has revealed the common excuses given for late payment, as well as the problems arising for small businesses due to late payment; including lowered morale and employment and retention problems. The survey polled 400 owners, MDs and CEOs of small construction businesses who suffer from poor cashflow due to late or outstanding invoice payments, to highlight the issues faced by supply chains following the high-profile demise of Carillion. The figures show the extent of the problem, despite the Government’s Prompt Payment Code (PPC) and last April’s enforcement of the Government’s new ‘Duty to Report’ scheme that requires large companies to report on payment practices twice a year. It

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follows official figures confirming that the number of British businesses going bankrupt reached a four-year high for 2017, with one in every 213 companies falling into liquidation – the highest since 2013. Published ahead of Mental Health Awareness Week, the survey also wished to highlight the ‘human’ cost as well as the corporate, and examined the personal, financial and business impact of late payments on owners. Some 74% of the construction companies polled have been on the brink of bankruptcy or liquidation, or could be soon due to late payments, which is a huge increase on the 40% reporting problems last year; while 48% – also nearly a quarter more than last year – blame poor cashflow for their panic attacks, anxiety and depression, with some even having suicidal feelings and almost a quarter (22%) experiencing emotions of ‘severe anger’. As a cost to business, 62% of owners said late payment issues meant that they had not paid themselves for some time, while 35% had stopped or delayed bonuses, 15% had had to pay staff late and 17% had reduced their own salary. A good third of small construction business owners also report that if customers continue to pay late it will

soon affect the progress and growth of their business, with 30% reporting it had already impacted staff morale, recruitment and retention, with 38% struggling to pay business rates and a quarter struggling to pay mortgage or rental payments on their office. PPD Managing Director Hugh Gage comments: “Recent high-profile cases such as Carillion have made many more people aware of the cost of late or nonpayment and how it can affect smaller construction firms, but in reality this has been going on for years. “Our latest research reveals that the impact of late payments has got even worse since last year and is having even deeper repercussions on smaller companies nationwide; it’s affecting and even destroying people’s businesses, health and lives. “Construction business owners need to arm themselves against some of the most common late payment issues and fight back against these poor practices. It’s always best to try and avoid them from the outset by using due diligence through credit reference agencies, or services such as the Prompt Payment Directory which rates businesses’ payment behaviour by those that it affects – their suppliers.”


TACKLING THE MOST COMMON BUT PREVENTABLE HEALTH AND SAFETY ISSUES ON HOUSE-BUILDING SITES Every year several thousand construction workers are injured while working on building sites. According to the Health and Safety Executive, during 2016/17 around 1,200 of these injuries were due to slips, trips or falls. Effective management of working areas and access routes could prevent some of these injuries. With an estimated 2.3 million working days lost each year in construction between 2014/15 and 2016/17 due to workplace injury (17%) and work-related illness (83%)*, NHBC, the leading provider of health and safety services to the homebuilding industry and the organiser of the UK’s only industry health and safety awards scheme, highlights the most frequently reported items in the final quarter of 2017:

• Workers working on scaffold with no guardrails in place • No fall protection on open stairwells • Access routes blocked with site materials • No eye protection being worn when using a Paslode nail gun • No respiratory protection being worn when using a disc cutter or saw • No pedestrian/traffic segregation in place, with operatives and members of the public walking in the road with the site traffic • Scaffold not being erected correctly in accordance with TG 20.13 NHBC health and safety advisers can provide coaching and advice to site

managers; when the right measures are in place, the safety of a site can be dramatically improved. Stephen Ashworth, Health & Safety Services Manager at NHBC, said: “Over recent years, we have seen big improvements with regard to safety on-site and the number of injuries to construction workers has reduced. Here at NHBC we’ve seen the importance given to health and safety on house-building sites across the UK, with record levels of entries for the NHBC Health and Safety Awards and higher levels of take-up for our health and safety services. “One way to avoid injuries on housebuilding sites is to make sure a safe work environment is provided; taking a proactive approach to safety on-site helps keep workers safe.”

CARILLION WORSENS SME PAYMENT CRISIS

The fall of construction giant Carillion has exacerbated the payment crisis for small construction firms, according to research from Funding Options, the online business finance supermarket.

Late payments are the subject of intense scrutiny at the moment, with Parliament having introduced a bill to accelerate payments made to SMEs, and the liquidation of Carillion has made matters worse this year. Some SMEs are now waiting over 42 days to get invoices paid, up from 40 days on average five years ago. With construction supply chains often including many small and mediumsized businesses with tight profit margins and less ability to deal with payment problems, delays in paying suppliers can threaten the whole supply chain’s financial stability, putting jobs at risk and threatening the Government’s ambitious housebuilding targets. Part of the problem is that many large businesses in the construction industry are able to stipulate long repayment terms to suppliers; many smaller suppliers to Carillion, for example, had to agree to 120 days for payment. Following Carillion’s collapse in January, these businesses received

almost none of the payment they were owed, with some estimating they will receive at most a penny in the pound. In June, a new bill was introduced in Parliament, which aims to address late payments for SMEs through the introduction of a deposit scheme. Conrad Ford, CEO of Funding Options, says: “A single late payment can be an issue even for larger and more successful firms, and worsening delays could create more insolvencies. “Carillion’s collapse sent shockwaves through the industry, affecting smaller suppliers who will now never get paid what they are owed. Construction businesses have high overheads and labour costs, and many cannot afford to wait for payment for lengthy periods of time. “It is crucial that construction companies understand all the options available to them for the funding they require to minimise the impact of late payments."

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NEWS

CROSS-PARTY INQUIRY CALLS FOR HOUSING AND WATER REFORM A cross-party inquiry, published by Policy Connect and the Westminster Sustainable Business Forum (WSBF), has urged the Government to establish a brand-new ‘Bricks and Water’ Sustainability Code for all new-build homes to alleviate flood risk and chronic water shortages. According to the Westminster Sustainable Business Forum, the proposed sustainability code would implement a “fairer, tougher and simpler” planning framework, offering the kind of consistency housebuilders have long called for. Crucially, the framework would reflect industry best practice and support developers, large and small, to achieve the very highest water efficiency and flood resilience standards. WSBF research indicates that 4.48% of all homes in England are at risk of flooding. Climate change means that the number of homes at risk could rise to 2.5 million by 2050, while the cost to the UK taxpayer already amounts to over £1Bn each year. And yet, at the same time there is a genuine risk of water shortage. England will need a further four billion litres of water every day by 2050, with projected water demand shortfalls of 22%. “Building the number of homes we need has become a pressing issue – we haven’t built enough in this country for a long time,” said report co-chairs Angela Smith MP and Baroness McIntosh. “As we increase the number of new homes, we must manage water sustainably and efficiently on a catchment scale. “WSBF’s in-depth year-long inquiry into housing, water and planning policy strongly concludes that the Government needs to act now to improve guidance and standards for the houses that are being built. Water is a precious resource and we must use it wisely. The Government needs to ensure we are building the green, water-efficient, flood-resilient communities that our children and grandchildren deserve.” Meanwhile, the report’s headline sponsor, Anglian Water, added: “It has never been more important for government, housebuilders and water companies to work together to promote and deliver water efficiency in the home. “New-build homes present an unrivalled opportunity when it comes to making sure that new communities are using water as efficiently as possible, with design standards and labelling offering great water-saving potential. Collaboration between government, planners, developers and water companies is essential if we are to meet this goal and we are ready to play our part.”

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BREXIT UNCERTAINTY PLAGUING SMES The National Federation of Builders (NFB) has called on the Government to clarify its vision of the future relationship between the UK and the EU. With less than 300 days to go until Article 50 is enacted, and just days left to the crucial European Council summit, the NFB is urging the Government to make Brexit work for SMEs. The NFB says businesses are showing concerns that there is no detailed vision of the future relationship between the UK and the EU after March 2019, which is making business difficult. The Government has published a technical note on the temporary customs arrangements, which will determine the UK’s negotiating position at the summit. The note states that the Government intends the backstop solution on the Irish border, agreed in December 2017 to fully align Northern Ireland with EU rules and avoid a hard border, to be timelimited and expire on 31 December 2021. This development is likely to clash with the EU’s stance on the issue, aimed at making the backstop a more permanent solution in an effort to safeguard the Good Friday Agreement. With MPs clamouring over the future direction of Brexit, and continual disagreement within and without both political parties and cabinet ministers, the NFB has warned that this is damaging businesses and the economy, particularly in the construction industry. Richard Beresford, Chief Executive of the NFB, said: “Currently 77% of products consumed in UK construction are already made in the UK, with some of our most exported products also being the most imported. Therefore, it is crucial that we invest in the capacity of those industries. “MPs and cabinet ministers need to stop fighting the EU referendum and come together to work out a cross-party approach to Brexit. SMEs and regional contractors across the construction industry need consistency and certainty if they are to grow and succeed after we leave the EU.”


WORKING AT HEIGHT SAFETY HIGHLIGHTED BY HSE

HOUSE PRICES STILL RISING The latest HPI statistics have been released, showing that house prices continue to rise across the country, albeit at a slower rate than previous months. The figures show average house prices in the UK increased by 3.9% in the year to April 2018, lower than the 4.2% growth rate in March 2018. The latest results also show that average house price growth has been slowing down over the past two years, remaining under 5% for most of that period. The exception was October 2017. This is its lowest annual rate since March 2017 when it was 3.7%. The seasonally adjusted rate shows house prices increased by an average of 0.7% between March and April this year, just above the 0.5% rate registered between March and April 2017. House prices in England provide the main source of growth, showing a 3.7% increase, bringing the average house price in England to £244,000. Wales has shown a good increase, with 4.4% growth over the last 12 months, bringing prices to a £156,000 average, with prices in Northern Ireland also enjoying an increase at 4.2%. Regionally, the South West is leading the growth rates at 6.1%,

with regional devolution helping to boost the West Midlands’ prospects with a 5.9% growth. The North West, meanwhile, saw prices increase by 2.4%. Once again, London continues its downward trend, with prices reflecting the capital’s market with just a 1% increase. Jeremy Leaf, a north London estate agent and a former RICS Residential Chairman, said: “These figures are interesting, albeit a little dated, in that they show house prices are continuing their more modest upward trend with little sign of correction any time soon. Behind the numbers bears out what we’re finding on the High Street – transactions are falling while listings have increased but are not making up for an historic shortfall whereas demand is relatively flat. “As a result, the increase in house prices is more to do with the lack of supply of appropriate property in places where people most want to live rather than a marked improvement in confidence. “Looking forward, we do not expect major change but do hope more sellers appreciate the difference between vanity and sanity when it comes to recognising these new market conditions.”

Two companies have been fined following an accident which saw life-changing injuries for a worker. The Health and Safety Executive (HSE) pursued prosecution of a contractor and scaffolding company following the incident in December 2015 when a subcontractor fell from a roof during works. Jhanade Ryan was working as a subcontractor for Centreco (UK) Ltd, installing solar panels to the roof of Firth Steels, Brighouse, when he slipped and slid down to the edge protection. The toe board of the edge protection snapped and he fell through the scaffold, falling five metres and landing on a sub-station flat roof. The fall resulted in a fracture to his spine, a broken coccyx and nerve damage, with Mr Ryan still suffering from mobility issues after almost three months in hospital. The HSE investigated the incident and found not only that the scaffolding company had not erected the scaffold to a known industry standard or design, but also that roof lights were present which needed to be made safe to prevent workers falling through their fragile surface. Oswestry Shropshire Scaffold Ltd of Pool Cottage, Oswestry, Shropshire pleaded guilty to breaching Section 3(1) of the Health and Safety at Work Act 1974 and has been fined £28,800 and ordered to pay £945.20 in costs. Centreco (UK) Ltd of Hearle House, Chorley, Lancashire pleaded guilty to breaching Section 3(1) of the Health and Safety at Work Act 1974 and has been fined £33,500 and ordered to pay £945.20 in costs. After the hearing, HSE inspector Jayne Towey commented: “Falls from height often result in life-changing or fatal injuries. In most cases these accidents are needless and could be prevented by properly planning to ensure that effective preventative and protective measures are in place such as edge protection or barriers built to the correct standard.”

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NEWS

£3BN INVESTMENT FOR LONDON GATWICK A five-year Capital Investment Plan (CIP) has been confirmed for London Gatwick Airport. An artist’s impression of Gatwick’s Pier 6 shows the proposed new extension to the west of the pier, more than doubling its size compared to today, as well as highlighting other aspects of the project including the position of the new A380 stand on Pier 5 and the widened taxiway which will enable the A380 to move between the pier and the runway. Speaking at the British-Irish Airports Expo in London, Gatwick Airport Chief Executive Stewart Wingate announced the plans, which will see some £1.1Bn invested over the next five years, with £266M of investment already planned for 2018/19. With airport numbers expected to increase upwards of 53 million through long-haul passengers and general growth, Gatwick is exploring how it can grow sustainably and make best use of its existing infrastructure. Gatwick is looking to provide additional capacity, improve resilience and harness new technology to support its growth, while also supporting the local and national economy and enhancing the passenger experience. Since the airport changed ownership in December 2009 the total investment figure, combined with this new five-year plan, has risen to £3.14Bn. A number of projects have been

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identified as significant parts of the expansion plan, with a number of developments expected to get underway this year. First off will be the Pier 6 Western Extension, where Phase I will kick off with enabling works to Pier 5. This will allow it to handle the A380 aircraft, so that it can move from its current home on Pier 6. Work involves the widening and reconfiguration of a taxiway to accommodate the 80m wingspan of the A380. A new domestic arrivals facility, including a new baggage reclaim in South Terminal, will be constructed, while a new mezzanine-level extension in the North Terminal departure lounge will accommodate new restaurants. Externally, the new road system and taxiway entrance to the new Boeing aircraft hangar will be completed, connecting the airfield with the new facility. The new hangar opens next year and will service the growing number of long-haul aircraft operating from Gatwick. Works to the South Terminal will see a reconfiguration of the hotel capacity, with the long-stay car park benefiting from an extra deck and 1,200 new car parking spaces for summer 2018. Meanwhile, enabling works will be carried out to Gatwick Station precipitating a Network Rail upgrade, and a new reception area will be developed for passengers with reduced

mobility in the North Terminal. Further projects to improve security and support the use of electric vehicles are also underway. Mr Wingate commented: “Gatwick is a major piece of national infrastructure, and our continued growth and ability to attract long-haul airlines is vital for the health of the UK economy, particularly in a post-Brexit world. We are exploring ways to grow our capacity, including developing new systems and processes to handle more passengers, and considering how we use all our existing infrastructure in the future. “By committing to spend another £1.11Bn, Gatwick can continue to grow sustainably, attract new airlines and offer more global connections, while providing an excellent service to passengers. “This year we will welcome new quieter aircraft with the introduction of A321s by easyJet and we are developing our infrastructure now, by reconfiguring airfield stands and planning for the construction of a major extension to our Pier 6 facility. These initiatives will support this next phase of growth. “Looking beyond this capital investment programme, we welcome the Government’s support for airports making best use of their existing runways and we will plan for our longerterm future by developing a masterplan later this year.”


IRISH CONSTRUCTION ACTIVITY ON A HIGH Figures from the Ulster Bank Construction Purchasing Managers’ Index® (PMI®) have been released, showing Irish construction is riding a year high with activity rising sharply over the last month. With construction firms across the country looking to put weather disruption from the ‘Beast from the East’ behind them, the PMI® registered 61.8 in May, up from 60.7 in April. Housing and commercial project growth led the charge in activity, with both industries posting considerable increases in consecutive months. New business and input buying also rose at faster rates, while job creation remained strong. The growth in activity is now being seen over consecutive months, and is also accelerating at the fastest pace this year, leading to a secure confidence in the sector. Activity has now been on the rise for 57 months. Commenting on the survey, Simon Barry, Chief Economist Republic of Ireland at Ulster Bank, noted: “The latest results of the Ulster Bank Construction PMI® survey show that Irish construction firms experienced strong, and faster, rates of expansion in May. The headline PMI® picked up for the second month in a row, with a highly elevated reading of 61.8 marking a year-high. Commercial construction recorded another acceleration in activity which took the Commercial PMI® to its highest level in nearly two years, in the process leaving commercial as the strongest-performing activity category last month. There was also a sharp rise in residential activity which took the Housing PMI® to its highest level in a year. The results for Civil Engineering were not as favourable, with activity here registering a decline in May, ending a five-month run of expansion. “Other details from the survey also highlight the strength of the ongoing expansion in activity. Strong demand for the services of construction firms was very much evident in further substantial increases in new orders, with the New Orders index picking up to a year-high in May. In turn, the buoyancy of activity and new business trends remains a very important driver of job creation and input buying in construction, with growth in both categories remaining at very elevated rates. And survey respondents remained strongly optimistic about the year ahead with a strong pipeline of new activity and improving economic conditions cited as important sources of support.”

LATEST ONS CONSTRUCTION STATS PUBLISHED The latest statistics on construction output have been released by the Office for National Statistics (ONS), showing a difficult three-month series for the industry. Following on from the monthly release, the three-month on threemonth series has shown a decline in output for the sixth consecutive month. Construction output has been calculated as falling 3.4% in April, the biggest fall seen since August 2012. With figures from the more volatile monthly statistics showing output rebound somewhat in April, the threemonth series shows that the industry suffered quite badly over the winter period. Anecdotal evidence from the monthly series points towards the terrible weather in March slowing construction starts on-site and this may well have affected the winter three-month on three-month, with the industry in general slowdown mode over winter. The April monthly figures showed an increase of 0.5% as the spring weather turned sunnier. Construction output peaked in December 2017, with figures showing a highpoint of 30.3% above the lowest point in the last five years, April 2013. Even with the decline in output from the beginning of 2018, output still remains 23.4% above this low point, and confidence in the sector remains steady. However, total new orders decreased over Quarter One with a fall of some 4.6% across the industry; infrastructure, one of the strongestperforming sectors due to government investment, shows notable declines in new work, dropping some £379M. Future government ambitions will hopefully see this sector turn around sharply. Other notable falls came in total housing repair and maintenance, and private housing new work. While the private housing sector enjoyed the most positive growth, increasing by

£29M, this was offset by falls in public other new work, which contracted 14%, and private commercial work, which decreased 7.6%. Commenting on the construction output figures for April 2018, Brian Berry, Chief Executive of the Federation of Master Builders (FMB), said: “The UK construction sector declined by 3.4% in the three months from February to April compared with the previous three months. This is the biggest fall since the latter stages of the recession in August 2012. The ‘Beast from the East’ has certainly played its part as it forced many construction sites to close in March. Indeed, builders were reporting that it was too cold to lay bricks.” He continued: “Alongside the cold snap, the drop in construction output can also be attributed to rising costs for construction firms large and small. While wages are continuing to rise because of the acute skills crisis in our sector, firms are also feeling the pinch thanks to increased material prices. The depreciation of sterling following the EU referendum has meant bricks and insulation in particular have become more expensive. We expect material prices to continue to squeeze the construction industry with recent research by the FMB showing that 84% of builders believe that they will continue to rise in the next six months.” Berry concluded: “In the medium to longer term, with nine months until B-Day, the future is uncertain for the UK construction sector. The Government is still to confirm what the post-Brexit immigration system will look like. The construction sector is largely reliant on accessing EU workers with more than 8% of construction workers coming from the EU. It is therefore imperative that the sector knows how, and to what extent, it can recruit these workers post-Brexit.”

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L AT E S T I N D U S T R Y C O M M E N T

VARIATIONS IN WRITING? CHANGE THE RECORD PLEASE, PETER!

If I had a pound for every time I warned a client to read the contract before signing up to it, I would be a very rich man. If I had a further pound for every time I had warned a client not to undertake additional work without getting an instruction in writing, I would be even richer! It is far from unusual for construction contracts to require instructions that are intended to vary the works by increasing or changing scope to be put in writing before an Employer is then obliged to pay for the work done under that instruction. The object of such a provision is clear; it is to avoid unwelcome shocks when it comes to settling the final account at a later date. In reality, we all know that variations are often instructed orally and if an adjudicator or arbitrator called upon to deal 14 

with such a claim is convinced that the Employer has received consideration for the instructed work, the contractor is likely to benefit from an award or decision requiring the Employer to pay for the instructed works. Clever lawyers drafting contracts for their Clients will be tempted to head off the above scenario by including a “no amendment” or “anti-variation” in a drafted contract to make it clear that the Employer will have no liability to pay for any additional or varied work unless there is a written document

signed by both Parties which varies the original contract to encompass the increased scope of works arising from the instructed amendment. The Court of Appeal considered so-called “no amendment” clauses in a case called Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd; CA 20 Apr 2016 in which the court had cause to consider a provision at Article 6.3 of the contract which said: “This Agreement ….can only be amended by a written document which


(i) specifically refers to the provision of this Agreement to be amended and (ii) is signed by both Parties” Despite what appear to be clear words requiring any amendment to be in writing, the Court of Appeal decided that it was still open to the Parties to vary their agreement orally or by conduct. Those of us who advise on construction contracts thought this was effectively the end of the debate on the subject of whether “no amendment” or “anti-variation” clauses actually work. The Court of Appeal decision suggested that they don’t. Well, it is now time to think again. The principle of “no amendment” or “antivariation” clause has just been considered in Rock Advertising Limited v MWB Business Exchange Centres Limited [2018] UKSC 24. In this case, Rock Advertising Limited (“Rock”) entered into a licence with MWB Business Exchange Centres Limited (“MWB”) to occupy office space. The licence contained an “anti-variation” provision requiring any amendment to the licence to be in writing and signed by both parties. It appears that Rock did not pay its rent on time and a dispute regarding this state of affairs started to emerge. Some six months after the licence had been signed, a director of Rock had a telephone conversation with a credit controller employed by MWB regarding the rent arrears. In this telephone conversation

a payment schedule was agreed to deal with both the rent arrears and the rent going forward. For reasons that are not entirely clear, MWB decided to renege on the telephone agreement, arguing that the payment schedule was a proposal made by Rock which MWB was not obliged to accept. Not unsurprisingly, the matter ended up in court. In 2012 The Central London County Court ruled that whilst the parties had orally agreed a variation to the licence in relation to the payment of rent arrears which would have been binding on them, the variation was invalid because it was not recorded in writing. In 2017 the Court of Appeal overturned the decision of the County Court finding that the oral agreement reached on the telephone to deal with the rent arrears also amounted to an agreement to dispense with the provision in the licence requiring variations to the licence to be in writing. However, on 16 May 2018 the Supreme Court reversed the decision of the Court of Appeal, finding that when the parties agreed the licence, they were entitled to agree in what circumstances and how the licence might be varied. Thus, the requirement to have any variation to the licence confirmed in writing and signed by both parties was binding on the parties and the oral agreement reached on the telephone to deal with rent arrears was of no effect. MWB was entitled to terminate the

lease as a consequence of Rock's failure to pay its rent on time. This case and the decision of our highest court brings welcome clarification on the effect of “no amendment” or “anti-variation” clauses. They do work and if a party signs up to such a provision the courts will, in all likelihood, be reluctant to rescue a party who in good faith has undertaken additional work in reliance on an oral instruction where the contract makes clear that only a written instruction will give rise to an entitlement to payment.

Peter Vinden is a practising Arbitrator, Adjudicator, Mediator and Expert. He is Managing Director of The Vinden Partnership and can be contacted by email at pvinden@vinden.co.uk. For similar articles please visit www.vinden.co.uk.

Regent House, Folds Point, Folds Road, Bolton BL1 2RZ t. 01204 362888 f. 01204362808

tvp@vinden.co.uk www.vinden.co.uk

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F E AT U R E

NAO PUBLISHES INVESTIGATION INTO CARILLION COLLAPSE The National Audit Office (NAO) has released its report on the investigation into the Government’s handling of the collapse of Carillion. With the liquidation of Carillion costing UK taxpayers some £148M, plus wider costs to the economy as well as Carillion’s customers, staff, supply chain and creditors, the NAO wanted to investigate the Government’s role and handling of the crisis. The investigation shows that the Cabinet Office began contingency planning for the possible failure of Carillion shortly after the company posted its first profit warning on 10 July 2017. The scale of the profit warning came as a surprise to the Government, as it contradicted market expectations and information and commentary that had been provided by Carillion. The report suggests that once the Government received the profit warning, Carillion’s risk rating should have been raised to ‘high risk’, the highest rating, rather than red which the Government did upon accepting Carillion’s argument that this could precipitate its financial collapse. The NAO report raises eyebrows over the company continuing to win government contracts, some £1.9Bn in value, including £1.3Bn of HS2

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contracts. Although many of these contracts had been agreed before the profit warning, in some cases contracts were signed, or variations agreed, afterwards. It states, however, that there were no grounds for disqualifying Carillion’s contracts under procurement rules, and while Carillion’s partners in joint ventures were liable to take over and finish the contracts if Carillion failed these contracts were secure. The report concludes that in the case of Network Rail, not awarding contracts would have meant re-procuring and redesigning the projects, thus increasing costs for the taxpayer and delaying work. When Carillion asked for government financial and restructuring support in January, the Cabinet Office decided it was better that Carillion enter liquidation. This was due to the serious concerns over Carillion’s business plans, the legal implications, potential openended funding commitments, the precedent it would set, and the concern that Carillion would return with further requests. The Cabinet Office will pay an estimated £148M government loss on the insolvency, covered by the £150M the Cabinet Office has already provided to help finance the costs

of liquidation. The Cabinet Office believes almost all services have continued uninterrupted following liquidation, although work on some construction contracts stopped, including two PFI hospitals. The collapse of Carillion has had a significant effect on the supply chain, former Carillion workers and investors. With 31 of Carillion’s 198 companies in liquidation, around 64% of the Carillion UK workforce have found new work and 13% have been made redundant, with the remainder still employed by Carillion. Carillion’s non-government creditors are unlikely to recover much of their investments, and the company’s extensive pension liabilities, totalling £2.6Bn as of 30 June 2017, will need to be compensated through the Pension Protection Fund. Amyas Morse, the head of the NAO, said: “When a company becomes a strategic supplier, dependencies are created beyond the scope of specific contracts. Doing a thorough job of protecting the public interest means that government needs to understand the financial health and sustainability of its major suppliers, and avoid creating relationships with those which are already weakened. Government has further to go in developing in this direction.”


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F E AT U R E

THE IMPLICATIONS OF BREXIT FOR UK CONSTRUCTION Article submitted by Mark James, Partner, Coffin Mew.

The implications of Brexit remain unclear to date. This will affect the construction sector, an industry that relies heavily upon certainty and market confidence. The impact of the continuing uncertainty on arguably the four most affected areas – workforce, materials, red tape, and funding – is discussed below. Workforce The availability of labour constitutes one of the biggest issues Brexit potentially creates for the UK construction industry. The industry is significantly dependent on EU migrant workers, both for skilled and nonskilled roles. Given that some say there are currently not enough British workers to meet the current demands of the industry, a departure from the EU risks making this trend worse. First, a shortage of workers could lead to higher project costs. In a postBrexit environment, where demand outstrips supply, UK workers could insist on higher wages. Second, this could hinder the achievement of the government’s objective to build one million new homes. This decline in housebuilding could worsen the housing crisis, especially in bigger cities such as London. Third, the replacement schemes that might be put in place by the government are not very promising. A

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new visa system could seriously deter EU workers from working in the UK. Such a scheme would not only take time and involve complex procedures but also be unattractive in comparison to other visa-free European countries. In turn, construction companies will face lengthy and costly procedures when employing foreign nationals. Construction materials It is suggested that approximately two-thirds of construction materials are imported directly from the EU. The problem is twofold. On the one hand, a weaker pound will lead to the rising costs of imported materials. On the other hand, the UK risks losing its tariff-free access to the single market, as well as facing the imposition of duties and limits on quantities. On the bright side, all the relevant parties in the industry – investors, employers and contractors – may be affected and it is anticipated that they will be more inclined to work collaboratively to limit such effects. Red tape Those in favour of Brexit have pointed out that extensive red tape and complex procurement regulations will disappear when the UK departs from the EU. However, it is important to appreciate that Brexit will not mark the

end of any trade relationship between the UK and the EU. While there are still uncertainties regarding the type of deal that will be put in place, it is highly likely that new trade agreements would follow existing trading standards. This is confirmed by the government’s white paper (The Great Repeal Bill), which seems to seek to convert directly applicable EU law into UK law. Funding As a member of the EU, the UK has been one of the biggest net beneficiaries of EU funding. The potential loss of such funding could seriously challenge the existence of future construction projects, such as High Speed 2 (HS2) and Crossrail. A departure from the EU may close some funding doors but could open up others. Any loss of funding may be rebalanced after the saving of the UK’s contribution to the EU, while the weak pound puts the UK in a positive light for investors. Overall then, the biggest challenge for the industry will be to present itself as an attractive investment choice regardless of the political uncertainties that dominate the delivery of Brexit. So, the only thing that is certain is that the position remains uncertain and, while that remains the case, the issues highlighted above will continue to haunt the construction sector.


F E AT U R E

Kate Faith Senior Solicitor, Construction Burness Paull LLP

SCOTTISH CONSTRUCTION COLLATERAL WARRANTIES: TIMELESS, OR ON BORROWED TIME?

Third party rights in Scotland have potential, but will collateral warranties ever really be on borrowed time? We speak to Kate Faith at Burness Paull LLP Procuring warranties can be very time-consuming and expensive, so there was much interest when the Contracts (Third Party Rights) (Scotland) Act 2017 (the “Act”) came in to force a few weeks ago. The Act consolidates a previously ambiguous area of Scots law, and makes it easier for parties to transfer rights to third parties without the need for a separate contract, such as a collateral warranty. Third party rights can now be granted by reliance on a schedule setting out largely the same information as you would find in a collateral warranty such as an express duty of care and the grant of a copyright licence. Employers/developers can now enjoy the efficiencies and cost savings that come with just one schedule to negotiate. Potentially, this is a big time saver. In practice though, has the Act really provided the change that so many of us were hoping for? Here are three reasons collateral warranties may stand the test of time: 1. Step-in Provisions Funders commonly seek the right to

step in to construction contracts as a means of protecting their investment. Along with rights, step-in provisions create obligations for the funder (eg. payment obligations), and obligations cannot be transferred to a third party via a third party rights schedule. We expect that funders may therefore continue to prefer collateral warranties. 2. Loss of Rights to Adjudicate There are limited scenarios (not discussed here) in which collateral warranties could grant a third party beneficiary the right to adjudicate. This is a divisive point of law. The decision in Parkwood Leisure Ltd v Laing O’Rourke Wales and West Ltd [2013] EWHC 2665 (TCC) overturned the presumption that a collateral warranty was not a “construction contract” for the purposes of the Housing, Grants and Regeneration Act 1996. As the statutory right to adjudicate flows from having a construction contract, it follows that a collateral warranty could offer third party beneficiaries the benefits of adjudication. Conversely, it’s doubtful that a beneficiary could raise an adjudication using third party rights granted under

the main contract. Statutory rights to adjudicate are granted to the parties to a construction contract. A third party is defined in the Act as “a person who is not a party to the contract”. This has not been tested in the Scottish courts, however. In reality, the range of circumstances whereby a third party beneficiary could have adjudication rights via its collateral warranty is narrow. Nevertheless, we anticipate that there will be some resistance to third party rights arising from this issue. 3. Market Expectation Third party rights are not a new concept in Scottish construction contracts. The Scottish Building Contract Committee (SBCC) suite already contains schedules of third party rights. Yet these are rarely used, perhaps because some parties prefer the security of having a physical collateral warranty. So far we’ve seen little uptake of third party rights – but it is early days. It’s understandable that third party beneficiaries may favour the tried and tested route, but in time the efficiencies and cost-benefits of third party rights may be sufficient to overcome longestablished practices.

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F E AT U R E

WHY CONSTRUCTION BUSINESSES ARE PLAGUED WITH SUPPLY CHAIN ISSUES

The construction industry is more than significant to the UK. The value of new construction work to the UK economy sat at around £99,266M in 2016. Despite this, 2,557 new construction company insolvencies occurred in the same year, second only to the administrative services sector. We spoke to Neil Robertson, CEO, Compleat Software, about the problems faced by construction companies. The most recent and notable was the collapse of Carillion, which eventually buckled under the weight of a whopping £1.5Bn debt pile. As you know, the wider economic consequences of this have been catastrophic. The whole affair raised some serious questions over outsourcing, auditing, supply chain inefficiencies, and business financial management in the industry overall. Many of the problems present within the financial structure and contract management of the giant at the time are likely to be representative of UK construction businesses as a whole. Why are UK construction business so plagued by supply chain issues? Manual processes to manage invoices and purchase orders are extremely labour intensive, timeconsuming and error-prone. This applies to all businesses; however, the construction industry falls prey to this more than most because of huge pressure on a fragile supply chain, and because their finance and procurement teams are not set up in a way to make the most of the technology that is readily available that helps reduce errors and improve productivity and efficiency. Construction businesses deal with

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a myriad of papers, including a high volume of purchase orders, delivery notes delivered to site, variation orders and architect valuations on completed works for invoicing. All of these lead to very labour-intensive invoice capturing and require a diligent approval process. In addition, delays from clients in agreeing to changes (as well as requesting them) are common, which leads to delays on contracts. The result of all this is normally increased costs due to rescheduling, reduced availability of resources and altered timelines which create fresh problems. It is all too easy for profitability to be eaten up by planned and unplanned changes without very meticulous processes in place – and manual processes become increasingly time-consuming and costly. The construction supply chain is also very fragile, and manual PO processes become very cumbersome for a few reasons. Firstly, delivery notes for materials such as sand and cement are based on weight or cubic metres and there are often variations on the original order. Secondly, inaccurate delivery dates. If for example, delivery takes place on the last day of one month, rather than the requested first day of the following month, the date on which the PO is processed will be 30 days out, which will have a big impact on credit terms. Lastly, undertaking three-way (order / receipt / invoice) matching is essential to manage the true costs of the business in real time and ensure that suppliers are billing correctly. However, doing so manually is extremely time-consuming and error prone. It is essential that payments to critical suppliers are timely, as any delay from exceeding credit limits or suspended supply can

have a disastrous impact on the project scheduling. When one of these things goes wrong or is delayed, the whole supply chain is at risk. What can construction businesses do to rectify this? The construction industry needs to embrace the right technology in order to tackle this problem. If they use the software that is readily available, they could improve the availability of realtime information to the budget holders and project managers, which would in turn stop delays and problems before they occur. Providing project managers with the tools that enable them to track every project, every aspect of the budget, every purchase order and all variations in real time would allow them to formalise and fully automate the invoice and PO processes to remove ambiguity about what was agreed, both in terms of goods and services and also prices. In addition, automating the reconciliation of deliveries against the order and automating the aforementioned three-way matching would save a huge amount of time on the accounting process, highlighting the exceptions that need attention. Of course, the construction industry faces a unique set of challenges. Managing the supply chain is more important and more complicated for businesses in this sector than many others. The technology that can equip project managers to avoid errors in the supply chain is there, it’s just not being utilised. After the Carillion collapse, it’s hard to understand why this is the case. We have seen what can happen if these systems and processes aren’t cleared up – it’s time to let technology take care of the problem.


F E AT U R E

NEW ANALYSIS SHOWS THAT LARGE CONSTRUCTION FIRMS ARE SOME OF THE UK’S WORST PAYERS – SOMETHING’S GOT TO GIVE!

Being paid late is the curse of millions of small and medium-sized construction businesses across the UK. Steps have been made by the Government and industry bodies to provide a fairer system for these businesses. Gary Turner, co-founder of Xero the UK’s leading cloud accounting software, tells us about the problem. In April, there was talk in Parliament of a Bill being introduced to ring-fence payments to subcontractors in an effort to avoid what happened with Carillion. But will this do enough? Xero has been helping small businesses monitor their key performance data since 2008, and now works with over 312,000 small businesses across the UK. So we recently decided to launch Small Business Insights, to create a more accurate picture of small business health. In a world where just four in ten (41%) businesses reach their fifth birthday, the data was released to shine a light on the pressure points for small businesses, to drive change and improve the outlook. By anonymising and aggregating this analysis, the data showed that 30-day invoices are, on average, paid after 46 days by companies within the FTSE 350. By analysing the insights further, Xero saw that the FTSE 350

businesses in construction and materials are one of the first offenders when it comes to paying small business clients on time. Perhaps unsurprisingly therefore, we found that these firms are paying 30-day invoices after an average of 57 days – that’s almost three weeks longer than the norm and almost a month after the deadline. As the fallout from the collapse of Carillion showed, the effect of late payments on small business suppliers can be catastrophic. This is made even more real by the fact that so many of our customers are affected. Xero analysis also found that fewer than half of small businesses were cash flow positive in any given month. Work done by the European Commission looking at both business to business and government to business payments found that late payments were directly associated with worsening firms’ cash flow positions. This leaves smaller firms with no option but to request overdraft extensions, leading to increases in their financing costs and in bank borrowings. It could also create uncertainty among creditors when evaluating borrowing requests. This can have a negative impact on business output. From the small business’

perspective, the traditional financial landscape can be difficult to navigate, but with newer intuitive technologies it can become much easier. Software removes as many barriers as possible to make payment simple, fast and easy, meaning more invoices will get paid on time. Reminders can be sent out automatically, helping suppliers to keep on top of invoice payments. The government also has an important part to play. Bills are being introduced that look to ring-fence payments to subcontractors and avoid others suffering in the same way Carillion’s are, the Prompt Payment Code and Construction Supply Chain Payment Charter aim to encourage businesses to make full, correct payment on time and the Late Payment of Commercial Debts Act provides for simple interest to be payable on outstanding debts. Xero is also keen to share insight into the health of the small business economy from the hundreds of thousands of small businesses currently using the platform. Findings like these exist to be used as a tool for bettering understanding of industry problems, the resulting impact on suppliers, and pave the way to solutions that can help stop history repeating itself.

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F E AT U R E

Paul Dyson is a Partner at HKA

SMES: BUILDING THE FUTURE Small and medium-sized enterprises (SMEs) are a vital ingredient to help drive better performance from our construction industry, providing specialist capabilities, innovative thinking, agile ways of working and often independent views and approaches. As such, SMEs have an important role to play as ‘agents for change’ or, in more current parlance, as disruptors. UKCE speaks to Paul Dyson, Partner at HKA, one of the world’s leading providers of advisory, consulting and expert services. We are all acutely aware of the ever-quickening pace of the globally focused aggregation of the construction supply chain, both horizontally and vertically, in response to the increasing complexity and size of (especially) economic infrastructure. Whilst clients, sensibly, look to larger organisations and their Joint Ventures (JVs) to deliver their projects, we believe that SMEs play a key part in providing a broader choice for clients and thus are an important part of the construction supply chain ecosystem. The importance of the small independent companies to the UK economy cannot be overstated; SMEs account for more than 99% of all UK business and employ over 12 million people. They are a vital and energetic part of our growing UK economy.

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It is interesting to observe that Germany has been highly successful in driving the expansion of its economy through the growth in its smaller businesses or ‘Mittelstand’. The UK government is cognisant of this success and is increasingly looking at ways to ensure that public money finds its way in part to SMEs. A good example of this is the current Crown Commercial Service’s (CCS) RM3745 Management Consultancy Framework Agreement that is looking to achieve 35% total spend through SMEs by 2020. The difficulty faced by all SMEs is their respective ‘routes to market’ – how do they compete, and how do clients gain access to their skills and experience? Cognisant of this and in support of the UK government’s SME objectives, HKA has been successful in forming a strong alliance of specialist SMEs to respond to CCS’s framework needs. To support the successful delivery of our partnership, we have established an open, transparent and collaborative teaming agreement giving equal opportunity to all partners to participate. Our view (and that of our partners) is that through such agreements we are able to offer very broad and deep capability in order to compete with much larger organisations. We are also able to

offer true independence free from any conflicts of interest. HKA believe that, in the wake of Carillion’s demise, there is a growing desire for clients to engage, where appropriate, with smaller consultancies that at the same time have access to a broad and deep set of skills that can be efficiently and effectively mobilised, something that larger organisations sometimes struggle to achieve. This is particularly true for the smaller but no less complex commissions. We carefully analyse each commission’s needs and draw together the appropriate capabilities from our own and our partner’s teams. Having a talented network ensures we are able to provide the right team at the right time. From our experience of working closely with SMEs, it is evident that there is an openness to collaborating and sharing, an ability to be more agile and responsive, provide deeper specialist knowledge and also to be more innovative. The construction industry is in need of both incremental and transformational innovation. HKA believe this is best delivered by assembling the best teams from different business cultures and experiences to positively impact outcomes.


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F E AT U R E

CONSTRUCTION (RETENTION DEPOSIT SCHEMES) BILL 2017-19 Lessons from Carillion: reform of the use of retentions in the construction industry at last? The Construction (Retention Deposit Schemes) Bill 2017-19 (the “Aldous Bill”) was introduced as a Private Members’ Bill in January by Peter Aldous MP and was expected to have its second reading in June this year. The aim of the Aldous Bill is to make provision for protecting retention monies in connection with construction contracts by amending the Housing Grants, Construction and Regeneration Act 1996 (the “Construction Act 1996”). The construction sector has some of the highest new company insolvencies per year. The need for reform is significant, the report published by the House of Commons Trade and Industry Select Committee in 2002 estimated that retentions account for some £3.25Bn per annum. Jonathan Hyndman, Partner at Rosling King, discusses the need for reform as demonstrated by the impact of Carillion’s insolvency earlier this year. Retentions Many building contracts and subcontracts provide for an employer (under a main contract) or a contractor (under a sub-contract) to retain a percentage of the value of the work carried out until completion or any defects are made good. Retentions are therefore in effect a form of ‘insurance policy’ used as security to ensure that works are completed and/or the remedy of defects. The Construction Act 1996 does not expressly make provisions for retentions, but the rules contained therein apply to the payment or withholding of a retention provided the contract is a ‘construction contract’. The need for reform In October 2017, the Department for Business, Energy and Industrial Strategy (“BEIS”) published a consultation to review the use of retentions, which referred to the results of Pye Tait Consultancy’s research. The BEIS consultation highlighted the

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following issues: 1. a significant proportion (44%) of contractors surveyed with experience of having retentions held from them experienced nonpayment of retention monies as a result of upstream insolvencies due to the majority (87%) of parties holding the retention in their main bank account which provides no ring-fencing protection; 2. evidence indicates that a proportion of construction customers may be making payment of a retention conditional on the performance of obligations under another contract (such arrangements being prohibited following reforms to the Construction Act 1996 which prevent a contract linking the release of retention monies to performance under another contract); and 3. delays in releasing retentions appear commonplace and significantly increase further down the supply chain, with those further down the chain also being less likely to receive retention monies than those higher up. According to the statistics of the Insolvency Service, in 2015 the construction sector had the highest number of new company insolvencies in England and Wales in comparison with other industries. These statistics, coupled with the issues identified by the BEIS consultation, only serve to support the argument for reforming the use of retentions in the construction industry. The BEIS consultation favoured a statutory retention deposit scheme, akin to the tenancy deposit scheme that is compulsory for all residential assured shorthold tenancies. Such a scheme would ring-fence the retention and put the monies beyond

the reach of an insolvency practitioner. Such schemes already exist in other countries. For example, in New Zealand, retention money must be held on trust and in New South Wales, retention money in respect of projects over AUS $20M must be placed in a trust fund. The current position In the event that a contractor becomes insolvent, it is not necessarily the case that an employer can treat the retention monies as its own. Indeed, if the retention monies are held on trust, then the monies should remain in the trust account until the criteria for the release of the balance are satisfied. Many JCT contracts provide that the retention monies are to be held on trust and in a separate bank account. An example of this is JCT Standard Building Contract with Quantities, 2011 Edition. However, there are many other forms of building contracts which do not provide for retention monies to be held on trust and JCT contracts are often amended to remove that provision. This is where subcontractors further down the chain are exposed. The proposed reforms The text of the Aldous Bill was recently published. In its present form, the Aldous Bill: 1. Amends section 111 of the Construction Act 1996 so that any clause in a construction contract entered into after the passing of the Construction (Retention Deposit Schemes) Act 2018, which enables a payer to withhold cash retentions shall be of no effect unless the monies are deposited in a retention deposit scheme and, prior to the first withholding of the monies, the payer has notified the payee of the scheme administrator’s name and contact details and the scheme administrator


of the payee’s name and contact details. A failure to comply with those requirements will require the payer to refund the cash retention to the payee no later than seven working days after the date on which the cash retention was withheld. 2. Extends the meaning of a “construction contract” as currently provided for in the Construction Act 1996 to include “any contract created to have a similar effect to a construction contract for the purposes of withholding monies which would otherwise be due under the contract”. 3. Defines the meaning of “cash retention” as “monies which are withheld from monies which would otherwise be due under a construction contract, the effect of which is to provide the payer with security for the current and future performance by the payee of any or all of the latter’s obligations under the contract”.

If successful, the Aldous Bill will therefore create a mandatory retention deposit scheme. However, it is noted that the Aldous Bill lacks specificity as it requires the Secretary of State and Welsh Ministers, by statutory instrument, to make arrangements for securing that one or more retention deposit schemes are available for the purpose of safeguarding any cash retention withheld in connection with construction contracts. Indeed, the scope of the definitions of “construction contract” and “cash retention” are wide and it remains to be seen how effective the reforms may be until the regulations put flesh on the bones of the Act. Moving forward Whilst it is rare for a Private Members’ Bill to reach the statute book, the Bill has gained support, perhaps owing to the insolvency of

Carillion earlier this year, which created a domino effect throughout the construction industry. According to the Building Engineering Services Association, 120 MPs have confirmed their support for new laws which would place retention monies into protection schemes. The widespread use of retentions might exacerbate the number of construction company insolvencies further if their use is not properly reformed. It is hoped that the Aldous Bill will increase confidence in the sector by ensuring retention monies are ring-fenced and thus potentially reducing the knock-on effect of insolvencies in the future.


F E AT U R E

WHEN WILL THE CONSTRUCTION INDUSTRY EMBRACE DIGITAL TRANSFORMATION? low of 47.0 in March. Anything above 50 indicates a moderate expansion of overall construction output. Hopefully, housebuilding, commercial building and civil engineering activity will continue to fuel the recovery, but it’s clear there are systemic issues within the sector that hold it back. Pre-digital methods

Commentators from the construction industry may be wondering what the rest of 2018 will hold for the sector. Q1 was incredibly bumpy – the collapse of Carillion in the first few weeks of January, the Beast from the East and ongoing uncertainties with Brexit meant firms faced unprecedented challenges. Stanley Chia, Senior Vice President for Tungsten Network discusses the situation. While the IHS Markit/CIPS construction figures for April showed an uplift, this is perhaps inevitable after the industry’s poor start to the year. The Purchasing Managers Index rose to 52.5 in April, its highest level for five months, having sunk to a 20-month

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While the modern supply chain is entering a new era, too many construction businesses are still using archaic, paper-based invoicing rather than embracing newer, streamlined digital systems. This isn’t just a shame – it has huge consequences. Reliance on paper in the finance department, manually entered data, and countless other dated practices leave too much room for friction in the procure-to-pay process. After the collapse of Carillion, it was revealed some suppliers were waiting as long as 120 days to receive payment from Carillion, many probably unaware of what stage invoices were at and feeling powerless to fight the late payment contagion. As a result, the government has vowed to implement an urgent crackdown on the late payments crisis, but legislation can only go so far. If construction companies run their back-office operations in an outdated and predigital way, productivity will continue to be hampered. Since 1994, according to the Office for National Statistics, UK output per

hour has improved by 60 per cent in the manufacturing industry, 30% in services, but only five per cent in construction. Why is this? In my opinion, too many construction companies are resisting digital transformation. Embracing technology to boost business Research conducted by Tungsten Network, in partnership with Forrester, supports this view. It found that the victors in the digital age will be the companies that best use technology to win, serve, and retain customers. It also found that too often supply chains and procurement practices are not yet optimised to meet the demands of today’s customers. When asked, both buyers and sellers – regardless of industry – outlined their many shared challenges, including cyber fraud, siloed data, insufficient cash, and legacy technology. These challenges distract from higher priorities, such as customer experience, product and service quality, and – crucially for the construction industry – operational agility. It’s important to note that construction is not the only industry falling behind. A recent Gartner survey found that only 42% of CEOs have begun digital transformation, while 451 Research’s Voice of the Enterprise Digital Pulse study showed that 60 per cent of organisations have no formal


transformation strategy in place. Despite this, many are feeling the pressure to transform how they run their businesses. PwC’s latest CEO Survey revealed that speed of technological change and cyber threats are among the top ten things CEOs worry about. So why is it so difficult to bring the digital revolution into an organisation? What is it about new technology that sparks such fear and how can construction bosses buck the trend? Most probably, it is the fear of the unknown and sometimes simply knowing where to begin. So much attention is given to customer-facing systems and processes and how they can be modernised that areas such as accounts payable, invoicing and supplier monitoring can easily be left behind. All too often a construction firm might update its website without thinking about its back office, paperbased and manual systems. If the goal is an agile and productive business the work must start from within.

A revolution with financial benefits By moving from a manual invoicing system to an electronic one, businesses stand to save tens of thousands of pounds each year as digitising the payment process reduces the cost of handling invoices by more than 50%. The shift is a major one, however, and one that has to be handled with care. When companies digitise their payment processes, everyone benefits. Electronic invoicing increases the efficiency, accuracy and productivity of the accounts payable team and it provides real-time data to optimise spending and support the procurement process. It also improves internal controls, reducing the potential for fraud and mistakes. For suppliers, they can have full visibility of their invoice status online, from confirmation of receipt to final payment meaning they no longer have to chase for payment. This strengthens supply chain

relationships and helps tackle the late payment epidemic. The truth is, many businesses are struggling with inadequate processes and it is impacting the bottom line. For businesses to thrive, they need to be properly managed using modern tools and processes that establish accountability, reduce uncertainty, and foster trust through creating a responsible supply chain. If the construction industry is to tackle its very real challenges – productivity and late payment to name just two – it’s time to stop sticking its head in the sand. Instead, firms need to look ahead and focus on removing friction from the construction supply chain by embracing what digital transformation can offer.

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Mental Health in Construction

When you think about jobsite hazards, physical risks probably top the list — an unprotected fall, an unmarked restricted zone, etc. But what about the dangers you can’t see? Anxiety, depression, suicidal thoughts, and more are as dangerous to worker safety as any more tangible job site threat, but these can’t be mitigated with caution tape. Unfortunately, the frequency of mental health issues is increasing within the construction industry. In fact, one study found that one in five construction workers struggle with mental health issues. This means that, of the people you work with every day, chances are good that at least one of them struggles with their mental health. Or, maybe it’s you. From labourers to high-level executives, mental health issues affect people indiscriminately. The construction industry as a whole needs to work on improving mental health outreach and support, but that can only take place one job site at a time. Industry Stats That Might Surprise You According to the Centers for Disease Control, the construction industry is one of the most at-risk industries for suicide — period. While regulations and monitoring for physical safety have increased dramatically over the years, mental healthcare lags behind. But, mental health is important — very important — and should be prioritized as highly as wearing a hard hat. Working in construction is tough, and there is no denying it. But, is there a direct correlation between working in this

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industry and mental health issues? The CDC study found that the construction industry exhibits many common risk factors that are associated with feelings of helplessness: • Competitive, high-pressure work environment • High prevalence of alcohol and substance abuse • End-of-season layoffs • Separation from family All of the above, and more, are proven to challenge mental stability. Their effects on an individual’s well-being are only compounded within a work culture which valorises “toughness.” The Construction Industry Alliance for Suicide Prevention reports that many within the industry suffer in silence due to cultural expectations. Despite advancements in education and awareness, mental health issues remain stigmatized in some circles, and suicide is a taboo topic on the job site. As such, many workers feel forced to “deal with it,” not seeking out the help they need, and symptoms get worse. To counteract this long-standing challenge, the mental health of your workforce needs to be prioritized at the same level as wearing safety goggles and tagging out live circuits. While some within the industry struggle to keep up with an evolving narrative about mental health, empowering workers to seek out resources is a crucial part of every manager’s job description.

What you can do to help One of the most powerful tools in your toolbox to fight against mental health issues is education. No progress can be made without a culture change, and every educated worker is a step closer to quashing the stigma that keeps workers from facing their inner demons. Research mental health outreach programs, and make these resources readily available to workers. Something like Suicide Prevention Hotlines are a proven resource that could save a worker’s life. The other important element is awareness — if you’re in a leadership role you can’t help someone if you don’t know they’re suffering. You simply don’t know what you don’t know. This further punctuates the need for full disclosure. Encourage workers to share mental health issues during new employee orientation. While some employees might be reluctant to share this information, if you foster a safe, understanding culture on and off the job site, workers will be more likely to open up. Mental health charities and resources: • Mates in Mind - https://www. matesinmind.org/ • Mind - https://www.mind.org.uk/ • Samaritans - https://www. samaritans.org/ • Mental Health First Aid England https://mhfaengland.org/


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WHY WELLBEING SHOULD BE AT THE TOP OF THE AGENDA FOR CONSTRUCTION BUSINESSES IN 2018 Anyone running a business in construction knows how tough it can be. Whether you’re ‘on the ground’ where the physical work can take its toll, or in a more senior role where you’re in charge of projects and managing customers, staff and contractors, pressures are constant. There is also the challenge of keeping on top of cashflow, which can be tough when materials and wages have to be paid ahead of payments coming in. We speak to Steve Noble, Chief Operating Officer, Ultimate Finance about mental health in the industry Work stresses and worries aren’t just felt from 9-5; the overall wellbeing of small business owners can also be at risk. Ultimate Finance surveyed SMEs around the UK – in construction and other key sectors – and found that often many take a disproportionate strain upon themselves, which can be detrimental to their health and happiness. Lonely at the top Running a business can be a lonely job. Our research found that nearly three quarters of small business owners admit to having felt lonely while running the business, with a third saying they regularly feel that way. And many feel that support around them is lacking; with three quarters saying they did not know where to turn to for support, beyond their family and friends. Feeling under pressure and stress takes its toll mentally, affecting sharpness and performance. But it

can also have physical effects. In fact, people who feel lonely are 30% more likely to suffer a stroke or heart disease (two of the leading causes of death in Britain) according to a study by the University of York. Striking a healthy balance This correlates with the findings from our own research, where we found that a third (30%) of small business owners in the UK have had a health scare since starting their business. This amounts to a staggering 1.8 million SMEs. In addition, almost three quarters (72%) of business owners and managers worry that their current work/life balance is having a negative impact on their health. The positive benefits of regular exercise and healthy eating are well documented, but a third of those surveyed struggle to find time to go to the gym or eat healthily. It’s not just a spin class small business owners are missing out on. Perhaps the saddest statistic from our research is that almost half (46%) of SME owners in construction sector would miss some special family occasions such as birthdays due to business commitments. Time to focus on wellbeing When you consider there are over five million SMEs, we could be heading for something of a crisis, not just in construction but across the other sectors we spoke to, including transport, manufacturing and hospitality. Wellbeing issues have

risen up the public agenda significantly in recent years – especially an awareness of mental wellbeing issues – but it’s clear from our survey that there isn’t enough support available. Raising awareness We are committed to shining a spotlight on these issues, and encouraging the rest of the business community to do the same. As part of our campaign, we have launched an information hub with guidance from health experts and insights from experienced SME owners to support those in need of help. We have also teamed up with business psychologist Robert Stewart on these issues, and he has this advice: “Many SME owners focus on the needs of the business and their employees but fail to address their own personal needs. I would urge the UK’s SME community to take this research seriously and establish their own process for looking after themselves. This may be in the form of a personal wellbeing advocate who can ask them difficult questions about their work/ life balance or simply by taking a more honest look at the way they work and creating boundaries.” My message to owners and managers in the construction sector is: put your own wellbeing on the agenda this year. Sometimes you may feel like you have no option but to plough on and take everything upon yourself – but stepping back and making some positive changes could have benefits that can’t be measured in pounds.

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MENTAL HEALTH IN THE CONSTRUCTION INDUSTRY

Kara Price and Sarah Wales, Solicitors at transatlantic law firm Womble Bond Dickinson Male site workers in construction are three times more likely to commit suicide than the average UK male. This shocking mental health statistic is a vivid reminder of the difficulties faced by many working in the construction industry every day. Troubling data from the Office of National Statistics found that between 2011 and 2015, of the 13,232 in-work suicides recorded, those within the skilled construction and building trades made up 13.2% – despite construction accounting for little over seven per cent of the UK workforce. We speak with Kara Price and Sarah Wales, Solicitors at transatlantic law firm Womble Bond Dickinson about the problem and steps companies can take to help. Why construction? The construction industry lifestyle is undoubtedly both challenging and stressful. Long and demanding working hours, working away from home on site for weeks at a time and the lingering unease in the industry, particularly following Carillion's recent collapse, are just some of the factors contributing to poor mental health. In a workforce that is predominantly male, specific risks associated with male mental health also need to be considered. The "tough guy" image widespread in the construction industry is very much to blame. Asking for help and opening up about emotions are just not things that come naturally to many of those working in the industry. The combination of these factors results in many suffering in silence. Know the signs Whilst poor mental health can manifest itself differently from individual to individual, the Construction Financial

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Management Association has set out some useful signs to look out for that can indicate poorly managed or untreated mental health conditions: • increased lateness, absenteeism and presenteeism (showing up to work physically, but not being able to function) • decreased productivity due to distraction and cognitive slowing • lack of self-confidence • isolation from peers • agitation and increased interpersonal conflict among coworkers • increased voluntary and involuntary attrition • increased feelings of being overwhelmed • decreased problem-solving ability. What can employers do? The statistics as they stand are clearly unacceptable – mental health needs to be made an urgent priority by all employers in the construction industry. Emily Pearson, Head of Workplace Wellbeing at Be.The Centre for Wellbeing (a mental health charity based in Newcastle upon Tyne specialising in corporate mental health and workplace wellbeing) has provided the following steps that all employers can take to actively improve the health and wellbeing of their workforce. 1. Culture check Undertake a culture check to establish the culture of the workforce and where there may be particular pain points for staff due to job design and work-related stress. 2. Culture change A change in the culture surrounding mental health needs to start at the

top. Leadership teams can show commitment to creating a culture change towards mentally healthier workplaces and workforces by signing the Time to Change Pledge or by investing in a Workplace Wellbeing Strategy to create culture change in a safe and structured manner. 3. Mental health safety net Employers should ensure their employees have access to and are aware of support available through counselling and therapy services. 4. Up-skilling and education Team leaders responsible for supporting employees should have sufficient knowledge and skills to be able to spot the signs of poor mental health and to provide support and guidance. 5. Peer support Employers should up-skill and educate employees so they can look out for any peers who may be struggling with their mental health. Knowing how to start the conversation and knowing how to safely signpost peers to mental health services can make a huge difference at the early signs of mental health difficulty. 6. Reduce stigma Employers need to reduce stigma, raise awareness, change attitudes and provide knowledge to empower employees to look after their mental health and wellbeing. 7. Embed and repeat It is essential that employers continue to provide these interventions, services and training in order to embed culture change – not just tick the mental health box.


Commercial Factors Employers need to prioritise mental health in the workplace for commercial reasons too. Unrecognised and unsupported mental health issues can have a massive impact on a company's revenue. According to the National Building Specification, mental health issues account for people taking almost 70M days off sick per year – the most of any health condition – costing the UK economy between £70Bn and £100Bn a year. What can everyone do? Established in 2016 by the Health in Construction Leadership Group with the support of the British Safety Council, Mates in Mind, aims to make sense of the options and support available to employers and individuals. As well as providing guidance for employers, it also provides useful tools for employees. But the easiest thing that we can all do is talk. If you are concerned about a colleague, ask them if they're ok. See if they want to go for a walk or a cup of tea at lunchtime. Generally create a safe environment so they can open up to you if they need to. Even if you don't suspect a colleague is struggling, be careful of the language you use anyway. Insensitive words or phrases can increase the stigma surrounding mental health and make it even harder for the people around you to feel like they can talk about any issues they're facing. Conclusion Physical health and safety is already taken extremely seriously in the construction industry. However, statistics suggest that the most dangerous thing on a building site is the human mind. At a time where suicide kills more people in the construction industry than falls from height, it is only right that mental health and safety is given the same level of thought, time and investment as other site hazards to ensure that the workers in the industry are truly protected. The industry has taken steps to reduce the stigma around mental health and to improve support but there is more that each and every one of us can do just by being aware of the signs and encouraging people to talk. Do not underestimate the impact you can make just by talking to someone. You could change someone's life.

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WHAT WILL HAPPEN TO HEALTH AND SAFETY

NEBOSH, The National Examination Board in Occupational Safety and Health, explores what might happen to health and safety regulation after Britain leaves the European Union next year. The majority of UK health and safety regulations introduced over the past 30 years originated from the European Union. So, with Britain now preparing to leave the EU on 29 March 2019, it begs the question: what happens next to all the health and safety laws governing the UK construction industry and how else might Brexit impact on the protection of workers? Perhaps the best place to start is with the UK’s “primary legislation” – the Health and Safety at Work etc. Act of 1974, which places a duty on all employers to ensure “so far as is reasonably practicable” the health, safety and welfare at work of employees and others. This overarching Act, which is goal-setting, rather than prescriptive, was derived wholly from the UK and therefore it seems unlikely that this key piece of Britain’s approach to health and safety will be affected by Brexit. It is also worth noting that the UK’s health and safety regime is largely seen as having set a benchmark for others to follow in Europe. At the same time, much of the “secondary legislation” (ie: legislation other than Acts of Parliament) around health and safety has been derived from EU directives. From a construction industry viewpoint, perhaps the most

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significant of these is the Construction (Design & Management) Regulations or CDM. The most recent enactment of CDM in 2015 largely ensured that the roles and duties of client, designers and contractors are now aligned throughout Europe. This included extending duties to domestic clients (ie: private households). Other significant health and safety regulation within construction, such as the Work at Height Regulations (2005) and The Control of Noise at Work Regulations of the same year, also followed on from EU directives. On the basis of what has been outlined so far, it appears, on the surface at least (and in the short term), that Brexit will have little impact on the health and safety laws of Britain, particularly as the European Union (Withdrawal) Bill, or ‘Great Repeal Bill’ as it is sometimes called, intends to incorporate all EU legislation into UK law in one go to ensure a “calm and orderly” exit. Uncertainty However, if there is one word that has been associated with Brexit since the referendum vote of June 2016 it is ‘uncertainty’.

Currently, it appears the Government will attempt to maintain strong free trade ties with the EU, which in practical terms will probably require adherence to the kind of standards and regulations already in place. The plan is that the UK Parliament will follow up on the ‘Great Repeal Bill’ with a programme that will "amend, repeal and improve" individual laws as necessary. Likely targets If health and safety deregulation is to happen post-Brexit, early candidates for culling could be those rules which the UK Government has previously been challenged on by the European Commission. One example is the Control of Asbestos Regulations 2012, which came into effect because the Commission felt that the relevant directive had not been implemented fully. Notification rules and the need to keep written records in connection with non-licensed asbestos work could, for example, be relaxed. At NEBOSH we consulted with members of the Health and Safety Lawyers Association (HSLA) recently about the likely impact on health and safety regulation arising from Brexit. Around three quarters felt that domestic


clients (ie: private households) could end up being taken out of scope of CDM (though in practice these duties are typically transferred to the contractor). A similar number felt aspects of the Working Time Regulations may be repealed. Other than that, 71% felt duties imposed on smaller firms may be watered down. Most, but not all, health and safety professionals see a Brexit-inspired relaxation in regulation as ultimately having a negative impact. A poll we carried out of those who hold a NEBOSH Diploma showed that 54% predicted a negative impact on their organisation, the implications of which would go far beyond higher injury and illness rates among workers. An increase in incidents at work would have an adverse impact on productivity and reputation, for example. Interestingly, a significant proportion of health and safety professionals do not believe a relaxation in health and safety regulation would make any difference to how their organisation ultimately operated. Brexit and any relaxation of health and safety standards could therefore prove to be irrelevant anyway! As one NEBOSH Diploma holder from within the construction industry told us: “Ultimately, as a company we have a duty of care to ensure employees follow safe systems of work no matter where we operate in the

world, regardless of Brexit.” Global perspective When we look at the overseas construction industry it is clear that its health and safety performance and culture has been changing, regardless of local legislative frameworks. Indeed, last year NEBOSH was a signatory to the Singapore Accord, a global professional capability framework developed by INSHPO (International Network of Safety & Health Practitioner Organisations). Organisations from Europe, the United States, Canada, Australia, Singapore and the Russian Federation came together to create what is effectively a global standard for OSH professionals, by drawing on evidence-based best practices from around the world. Global construction companies recognise that there are business benefits in better health and safety management and good governance in general. In the Middle East, for example, we can see that standards are gradually improving and there is strong demand for highly qualified health and safety professionals on site, not because the local laws require it, but because in order to win major contracts construction companies must demonstrate high levels of competence as well as

compliance with international health and safety standards. Britain has in many respects been at the forefront of performance improvements and higher global standards, setting examples of health and safety excellence in construction through high-profile projects such as the London 2012 Olympics. Over 80 million hours were worked on the Olympic build with an accident frequency rate of just 0.15 compared to an industry average of 3.4 at the time. For the first time in Olympic construction history there was not one fatality. Undoubtedly, a regulatory framework sends a strong message not only within industry, but to the rest of the world about the level of importance a country places on people’s health, safety and welfare at work. However, at organisational level, regulation coupled with culture, ethics and business objectives make a significant contribution to health and safety performance. In 1974, the year after Britain joined the European Economic Community (EEC), 166 UK construction workers were killed. Last year there were 30 fatalities. Whilst any fatality is unacceptable, the downward trend is positive and – with or without Brexit – one that the industry should continue to prioritise.

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PLAY THE GAME OR SAVE LIVES? Behavioural science is the scientific study of human behaviour and has been used for several decades now to improve performance. The momentum is gathering in the UK as increasing numbers of construction companies are awakening to the huge benefits this scientifically proven discipline can offer their business. We speak with Bob Cummins, one of the UK’s leading practitioners in behavioural science within health and safety, an author and founder and director of Sodak Limited, based in Edinburgh. Pick your side Are you playing along or are you helping design a better future? Do you believe that the worker gets injured because they are stupid or are they just trying to do their job and get the task completed for you? Do you think that giving the worker a patronising talk on how injuries affect their life will drive safer behaviours or do you understand that they didn’t come to work to get injured in the first place? Do you believe that everything is ok because that box is ticked or are you going to get out there and help the ‘atrisk’ worker do their job without losing a limb or their life? What kind of safety leader are you? The majority of the UK’s major construction companies’ health and safety management is sliding down a dangerous path. There are things that we do as an industry that we will look back on in years to come with disbelief. Our children will look at us with disappointment as we recount how we used to try and drive health

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and safety compliance with threat and coercion instead of compassion and genuine support. As our species matures, we become less tolerant of practices that cause human suffering. Child labour, slavery and marital rape were all legal in the not so distant past. Health and safety at work has improved because of our recognition that people shouldn’t come to work and be made less healthy or suffer injuries, but we still have a long way to go. I’m sure you would agree that injuries causing suffering should be prevented in the workplace but most of us lack the ability to delay gratification and ensure workplaces are as injury free as they could be. We have the right intentions but when push comes to shove we will put ourselves and others in a position of risk to get the job done quickly. We are not great at doing things in the present to benefit our future, what behavioural economists call delayed discounting. This is why there is a need for legislation and policy. Good policy is designed to nudge us to do things in the present that may be slightly more onerous but will benefit us in the future. Pensions are a good example of an enforced rule that takes something away now to allow us to live a better life in the future. Health and safety is the same. To do the right thing, to plan the job, to carry it out safely, to provide the right equipment, to get the right people, at the right time all take effort in the present for a benefit in the future. The problem is, we don’t live in the future, we live in the present. So, although we understand that saving is good and wearing a dust mask when

required is beneficial, we have to give up something in the now for an imagined future that is not entirely certain. What’s more, we learn that we can get away with ‘risky’ behaviours and achieve what we want in the moment with very little perceptible detriment to our future. This is a future that we aren’t yet experiencing versus a present which we most definitely are. This is why some people still smoke, drink or eat too much despite the obvious health risks. It’s why work causes us to be ill and why we place ourselves in dangerous situations for short-term gain. We are continually trying to achieve things in the moment supported by a society and culture that rewards instant gratification. Risk behaviour The way we manage a lot of health and safety in the workplace ignores this knowledge of basic human functioning. Legislation exists because governments understand that individuals won’t always do the right thing just because they’re asked to. We need to have rules and policies, positive and negative reinforcement. The government doesn’t get it right all the time of course and has recently begun to enlist the help of behavioural experts to help improve policy decisions but they do understand that changing behaviours takes a multifaceted approach of expectation setting, removal of obstacles, measurement, motivation and feedback. It takes effort to do the right thing as an individual. Left to my own devices, I am likely to opt for instant gratification over delayed gratification but, as part of a collective, my ‘now’ efforts can be supported by others. I get reinforcement


in the present for behaviours that will bring future benefits. We can recognise, acknowledge and reward ‘now’ effort in others to make the delay of gratification more likely to happen. In our affluent lives, filled with things we don’t need we’re still perfectly programmed for surviving in a hunting and gathering world that no longer exists. Culture change We can help mitigate our outdated programming by creating cultures and social norms that support purposeful behaviours with long-term benefits. The majority of current health and safety management systems are built around instant gratification. Briefing a worker on what to do and getting a signature on a piece of paper to prove a briefing happened is instant gratification. It is also irresponsible. It doesn’t make anyone more competent or safer but the manager now has a checkbox ticked and a signature that proves any accident wasn’t their fault.

This is not how we should do safety. Or, think of the workers who are told they have to wear safety glasses constantly when working on site, and are then issued with one pair of poor quality, cheap, uncomfortable glasses. Instant gratification from management’s point of view but completely irresponsible. Many of the current behavioural safety programmes are also built around instant gratification for management and are near to useless for the worker. A four-hour briefing depicting the horrendous injuries that could befall you coupled with the obvious statement that you want to go home safe every day is not going to make you behave more safely when you are at risk. That’s not how humans work. If it was, scary pictures on cigarette packets would have been all that was needed to stop people smoking and prevent large numbers dying. A myriad of current safety practices designed to make management feel good about the action they have taken

leave workers bewildered and drive an even bigger wedge into the divide. Safety stand downs, yellow and red card systems, near miss reporting, tool box talks, safety posters, reverse parking, safe to start checklists – I could go on. None of these things actually save lives. It’s time to apologise for all the nonsense created and continually supported by playing along. It’s time to use the scientific research that is readily available and to design systems and processes that help to drive the safer behaviours we want. This will take more effort in the short term, but it is the only way we can improve. Collectively, we are supporting the broken system, collectively we can create and support a better future for everyone at all levels within our construction industry. Are you playing along or are you helping design a better future? Pick a side.

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ENHANCED SAFETY WITH RADIO CRANE CONTROL

According to data from the Health and Safety Executive (HSE), construction worker fatalities dropped by more than a third in 2016/17, reaching an all-time annual low. Here, Tony Young, director at supply, installation and repair specialist CP Automation, explains why these findings may be partly down to the industry embracing new ways of working — including equipment like radio-controlled cranes. Cab-controlled cranes have long dominated the industrial landscape, with the operator sitting in the crane, being guided by hand signals from a floor walker. This developed slightly to machines controlled by pushbutton pendants. This involves a transmitter unit hanging from the crane by a cable being controlled by someone on the floor. However, this still tethers the operator to the crane and restricts movement. This is where radio crane control comes in. A handheld, cordless unit allows operators to remain on the facility floor, out of range of load swings and potentially dropped loads. It also means that if lifting is taking place in hazardous areas, such as hot, noisy or radioactive environments, operators are kept safe, well away from the area. This keeps the operator clear

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of the area and overhead load, providing significant health and safety benefits. Freedom of movement

The cordless flexibility means the operator is able to move to a much better location for visibility, rather than remaining limited to the field of view of the cab, or the length of the pendant cable. With this increased visibility, on foot and away from the load, the operator can clearly see a load shift and determine whether the load is properly rigged before continuing. They can also adapt quickly to any obstructions or changes in the path as the move is completed. Equally, with the operator on foot, communication is greatly enhanced. The need for hand and voice signals between the operator and spotter is eliminated. Operators are closer to spotters, and can easily hear and act on what they are saying more quickly. From an efficiency standpoint, floor operation may even eliminate the need for additional assistance on the floor completely. A single operator could also manage some of the operations with below-the-hook attachments such as magnets, grabs, or C-hooks. This reduces labour costs.

New partnership

To help with this shift from cabcontrolled cranes to safer, radiocontrolled systems, CP Automation is now supplying its customers with stock from Magnetek, the market leader in crane and hoist systems. Cranes can be fitted with both CP Automation and Magnetek products as an integrated package, including power delivery systems, collision avoidance systems, radio remote control transmitters, motor gearboxes, failsafe brakes and variable frequency drives (VFDs). Together, these products allow cranes to move heavy structures with sufficient power, control and intelligence, as well as increasing safety with remote control. "The partnership brings together the right set of products to support the rapid growth of the crane industry at present," explained Andy Swann, Business Development Manager EMEA at Magnetek. "Together we can provide a customisable, engineered system to match the most demanding of specifications, ensuring reduced load sway and load drops. "We are seeing more and more crane original equipment manufacturers (OEMs) moving away from in-cab operators and opting for radio remote control, whereby the


operator is at a safe distance away from heavy loads. This means much more aggressive materials can be handled during a project, and the operator is kept at a safe distance, controlling the crane from afar." CP Automation's stock of collision avoidance systems, AC & DC drives and radio remote control systems has already gone down well with our customers in the crane industry. This coalition brings additional functionality that the crane industry has been waiting for, bringing together a collection of drives, resistors and crane-specific products that we can also fit, using our trained engineers, if required. Ultimately this arrangement is driven by a focus on safety for crane operators. With more companies choosing radio remote control systems over cab-controlled systems, it makes sense to join Magnetek's marketleading technology along with our own range of products to drive this mentality in the industry. While the HSE’s statistics indicate that the safety of the construction industry is moving in the right direction, there is still room for improvement. As this shift towards radio-controlled cranes progresses, the industry will continue to advance its safety procedures and protect its workforce.

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FLEET & PL A NT

FMB CALLS FOR CONSTRUCTION LICENSING

Almost 80% of builders and consumers support a licence scheme for the UK construction industry.

According to new research published by the Federation of Master Builders (FMB), the majority of industry members and consumers think a licensing scheme for construction would help stamp out rogue traders. The independent research report by Pye Tait entitled ‘Licence to build: A pathway to licensing UK construction’, was commissioned by the FMB to show how the construction industry can improve its image. The report details the benefits of introducing a licensing scheme for the whole construction industry and puts forward a proposal for how it could work. Meanwhile, new consumer research undertaken by the FMB reveals the impact rogue traders and poor experiences with building firms has on consumers, with nearly all home owners showing support for a mandatory licensing scheme. With over half of consumers having had a bad experience with a builder, 90% believe that the Government should criminalise rogue and incompetent builders. Commenting on the research report, which was launched at a high profile event in the House of Lords, Brian Berry, Chief Executive of the FMB, said: “The vast majority of builders and home owners want to see the construction industry professionalised

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and it is time for the Government to act. It’s unacceptable that more than half of consumers have had a negative experience with their builder. However, we shouldn’t be surprised by this given that in the UK, it is perfectly legal for anyone to set up a building firm and start selling their services without any prior experience or qualifications. This cannot be right given the nature of the work and the potential health and safety risks when something goes wrong. In countries like Australia and Germany, building firms require a licence and we want to see the UK Government regulate our industry in a similar manner.” Berry continued: “Aside from the obvious health and safety benefits, the advantages of a licensing scheme are manifold. Licensing would bar from the industry the very worst firms operating in the construction sector. Consumer protection would increase and with it, the appetite among home owners to undertake more construction work. We also believe that if we can improve the image of the industry through licensing, young people, parents and teachers will have a more favourable impression of our sector and therefore be more likely to pursue, or recommend, a career in construction. Over time, this would

gradually help ease the construction skills shortage we currently face. For too long, the very worst construction firms, most of which undertake private domestic work, have been giving the whole sector a bad name. So that’s why this scheme should be of interest to the whole sector and not just small local builders.” Berry concluded: “In terms of how the scheme might work, it needn’t be too costly or bureaucratic. Our report draws on the experience of experts from across the construction industry and puts forward a clear proposal. We are suggesting that the scheme covers all paid-for construction work by firms of all sizes, not just those working in the domestic sector. Fees should be tiered and could start at as little as £150 every three to five years, with the largest contractors paying around £1,000 over the same period. In terms of how it’s governed, the licence should be administered by a single authority with a broad range of scheme providers sitting underneath. We are now keen to reach out to the whole construction sector to get their input on the proposal. If we can demonstrate broad support for this approach, we are optimistic that the Government will take it forward.”


FORWARD FEATURES 2018 Construction Media incorporates the UK Construction Online website and UK Construction Excellence, along with bespoke media and marketing solutions for those working for or looking to engage with the construction supply chain. Our forward features list for 2018 encompasses the key themes and topics shaping the industry now and for the future. UK Construction Online is the go-to resource for the latest news and insight for the construction industry. Our content keeps industry professionals ahead of breaking developments and fully informed on the factors influencing this multibillion-pound sector. UK Construction Excellence is our flagship magazine, which showcases the very best in British building, high-end projects, construction suppliers and influential construction companies. The publication is credible, vibrant and a voice for the industry. It offers a platform to position our client’s company, products and services, and acts as the perfect vehicle to build a business’s profile and brand in a publication which is read by the construction industry’s leading players.

September | Technology in Construction Deadline: Editorial - 18/08/18

Artwork 25/08/18

Advances in technology are transforming the construction industry. From digitisation to drones, innovative new technologies are helping to increase quality, reduce costs and improve safety in all areas. This month we focus on the innovations that are moving the dial and helping to shape the construction industry of the future. Themes include software, BIM, UAVs and the Internet of Things.

October | Education

Deadline: Editorial - 17/09/18 Artwork – 22/09/18 As the nation opens its doors to a new school intake, we explore the opportunities for the construction industry arising from the Government’s education agenda. From renovations and refurbishments to the building of new and interactive learning environments, what is happening and how can construction play a positive part in improving educational standards?

November | Energy & Utilities

August | Housing

Deadline: Editorial - 16/07/18 Artwork 23/07/18 Tackling the housing crisis. Hand-in-hand with the skills shortage, the UK’s much-publicised housing shortfall continues to dominate headlines nationwide. The government has pledged to build tens of thousands of homes ahead of 2020, and during August we evaluate what is being done to address this, and what opportunities exist within the construction supply chain.

Deadline: Editorial - 15/10/18 Artwork – 19/10/18 With green energy overtaking coal-powered production in the UK, we take a look at the energy scene. From solar power to nuclear, we investigate the changes this is making to UK industry and landscape and where the future lies. As more homes are built and our future energy needs change, how will the UK adapt to these challenges?

December | Annual review

Deadline: Editorial - 16/11/18 Artwork - 20/11/18 We take a retrospective look at some of the year’s biggest stories.

Additionally, each month the magazine features a project focus, as well as articles on BIM, construction software, legislation, Health & Safety, sustainability, fleet, and plant.

Telephone: 0845 557 1316 - Sales emails to: enquiries@ukconstructionmedia.co.uk Editorial emails to: vicky.maggiani@ukconstructionmedia.co.uk


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