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What happens next? Construction issues in 2022

This article is from December’s edition of Aggregate, which featured a month-by-month review of 2021. This is December’s entry. To read the complete newsletter as a PDF, click here.

It’s left to me to bring the year to its end by getting the Archor crystal ball out and considering what might happen next year. The world of construction never stops!

First and perhaps most critically, because everything else rides on it – construction market analysis firm Glenigan predicts a return to pre-covid levels during 2022, with underlying starts anticipated to be 3% above 2019 levels. That’s likely to be driven by public sector projects in particular infrastructure investment, and a swathe of office refurbishment to cope with post-covid working styles. A good workstream is clearly good news for the industry – although the effect that will have on labour and materials remains to be seen.

On that front, there have been some signs of labour and material shortages levelling off. But there is little sign of a long-term change in the availability of labour post-Brexit, so how sustainable that is remains to be seen. Material shortages should lessen as the world gets back to something like pre-covid operations, although there are likely to still be pinch points around certain projects and resources. Those tendering would be wise to build these into their prices, or to find ways to guard against the risk of further spikes.

Perhaps the difficulties around labour supply will see more and more contractors turning to technology and Modern Methods of Construction, particularly offsite production where labour levels can be more carefully moderated. There has certainly been a trend towards this in recent years and the industry has shown it is willing to embrace the change. The slight compulsion caused by shortages might in the long-term be good for accelerating adoption of new technologies.

There’s little concrete legislation in the pipeline. A private members’ bill was introduced into the House of Lords in October that seeks to abolish the taking of retention altogether – a step further than previous attempts, which have sought to have retention limited and placed in a deposit scheme. As with most private members’ bills this one is expected to fail for lack of legislative time, but it keeps the question of retention alive. At some point, though perhaps not in 2022, the industry is going to have to address this.

The Grenfell Inquiry will continue, with the last phase scheduled for May 2022 expected to consist of further evidence from expert witnesses. It’s unlikely that the Inquiry will lead to any specific action in 2022, but the Building Safety Bill is continuing its passage through Parliament. This Bill is the primary means by which the government plans to implement the major recommendation of the Hackitt review, which was the independent review led by Dame Judith Hackitt looking at Building Regulations and fire safety that reported in May 2018 – so expect lots of construction-related developments including the creation of the Building Safety Regulator and the New Homes Ombudsman, amendments to Building Regulations and Building Control, and a new regime for the regulation of construction products.

On the disputes side, we expect to see the end of more projects that have been affected by covid, and therefore a rise in delay and loss and expense disputes. At some point we may get a court decision on how covid is dealt with under the main forms of contract, which would be welcomed by many: although there is a working view of what probably happens under JCT, NEC etc, some judicial guidance based on actual events would be useful. It will take a dispute large enough to make court proceedings worthwhile, though, and could still take some time for it to make its way through the process, so a decision in 2022 might be a little optimistic.

Even given the last few years’ events, it’s a brave person who predicts the future with any certainty, we can be pretty sure that there will continue to be plenty of disputes about payment and pay less notices. So whatever else 2022 brings (and would it really be an edition of Aggregate without our saying this?!): make sure you get your applications and payment notices in on time! What better way to end?

About the author

Oli is one of our Partners, specialising in construction disputes. Read more about him here.

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