The Week That Was - 13 November 2020
Welcome to The Week That Was, a round-up of key events in the construction sector over the last seven days.
51% of SMEs cut back on insurance following pandemic
It is reported that 51% of SMEs have cut back on insurance as a result of the pandemic as a way of reducing expenditure. As a result, under-insurance is likely to be a problem for many small businesses going forward.
Many SMEs have simply stopped paying for insurance such as employers liability, professional indemnity, cyber and business property cover. Research from the Insurance Index also shows that one in five SMEs have stopped paying for business interruption insurance.
Steve White, the Chief Executive of the British Insurance Brokers' Association, advises that it is essential for SMEs to maintain their insurance, particularly in light of COVID-19. He also suggests that small businesses should speak to their brokers to make sure they have the correct cover in place.
Another trend to emerge from the pandemic is SME's increasing use of credit for payments, with 64% of SMEs using their business credit cards or personal credit cards. A further worrying trend is that the Index also shows that around 46% of SMEs are defaulting on their credit payments.
Further information is available here
New Government rules on contractor's payment times
The Government has announced new rules for contractors hoping to win public sector jobs which are designed to speed up payment times within the industry.
Main contractors will not be able to win public sector jobs unless, in one of the two previous six-month reporting periods, they have paid at least 75% of their invoices within 60 days. In addition, from April 2021, for jobs over £5m, contractors will have to prove that they are paying at least 85% of invoices within 60 days, and also explain why that figure is not 95%.
This follows the Government's briefly-held target last year that all main contractors should pay at least 95% of their invoices within 60 days, a target withdrawn after research showed that only a very small minority of contractors were hitting it.
Further information is available here
Morgan Sindall optimistic
Morgan Sindall has resumed dividend payments and forecast that full year profits will be better than expected. This follows a fall in interim pre-tax profit of in excess of 60% in the summer, due to disruption caused by COVID-19. The profit, expected to be £50-60m, is down from £88.6m in 2019.
Promisingly, Morgan Sindall added that the current 'second lockdown' would not have the same impact as the first (March) lockdown. This appears to be reflected in the fact that it has paid back £9.5m received from the Government's furlough scheme during that first lockdown, adding that taking Government money while paying dividends to shareholders was not what the scheme is designed for. Other companies taking a similar approach include Foster & Partners, with the architects similarly confirming that it has paid back money received from the furlough scheme.
Further information is available here
Taylor Wimpey productivity nearly back to normal
Following the first national lockdown in March, construction activity and demand has rebounded strongly and Taylor Wimpey consider that this will remain undiminished by November's second lockdown.
Chief Executive Pete Redfern states that Taylor Wimpey are "now safely operating at close to normal capacity with a product profile well positioned to meet customer demand". He also says that customer-forward indicators and sales have remained strong, with the total order book, excluding joint ventures, representing 11,530 homes as of 1st November 2020 – an increase on 2019's figure of 10,486. The company are also significantly ahead of their normal rate of acquisition, having authorised £826 million of gross land purchases since the end of the second quarter. This is another indicator of a return to normality and leads to optimism for the industry's future.
Further information is available here
Watchdog issues rolled lead suppliers with £9m fines
Two of the UK's largest rolled lead suppliers, Associated Lead Milles and BLM British Lead, have been fined more than £9m by the Competition and Markets Authority for forming an illegal cartel.
The companies admitted to colluding on prices and sharing the market for rolled lead, which is a key roofing product. Michael Greenfell, Executive Director of Enforcement at the CMA, noted that “Construction is a sector firmly under our spotlight and if businesses break the law by entering into anticompetitive arrangements, they run the risk of large fines."
The fine sends a strong message to the construction industry that such collusion will not be tolerated.
Further information is available here