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The Week That Was - 16 December 2022

Published on 16 December 2022

Welcome to The Week That Was, a round-up of key events in the construction sector over the last seven days.

Banking reforms boost for UK construction and infrastructure

Investment in UK infrastructure could soar in the wake of banking reforms announced by the Chancellor last week.  The Edinburgh Reforms will repeal hundreds of pages of laws governing banking practices, including those restricting how insurers invest in long-term assets. 

The Association of British Insurers said replacing these EU-era Solvency II rules could provide an extra £100bn of productive finance to invest in both UK social infrastructure (including schools, hospitals and homes) and green-energy supply.  Director-general, Hannah Gurga, said: “We strongly welcome these changes to the Solvency II regime, which will allow the UK insurance and long-term savings sector to play an even greater role in supporting the levelling-up agenda and the transition to net-zero.”

Construction consultancy Turner & Townsend called for “smarter regulation rather than deregulation”.  Infrastructure director, Sacira Coric, said: “To unlock the potential benefits of infrastructure… we need to tackle its illiquidity and make it far easier to invest.”  She also explained that there is still a way to go in regulating performance on environmental, social and governance criteria.  Further steps to ensure products are transparent and use consistent standards would "make infrastructure more investible and better demonstrate its long-term value in tackling society’s biggest challenges.” 

For more information, please see here.
New coal mine approval

The levelling-up secretary, Michael Gove, has given the go-ahead for the UK's first new coal mine in 30 years.  His approval was conditional on the pipe-jacking construction method being used on the project for environmental reasons, namely to minimise the impact on the ecology and the loss of ancient woodland at the site near Whitehaven, Cumbria.  Pipe-jacking is a specific tunnelling technique whereby a tunnel lining is shoved or ‘jacked’ forward as the tunnel face is excavated using hydraulic rams or a water pump powered by hydropower.  The alternative technique, known as cut and fill, involves digging a trench, creating a tunnel and then filling it to restore the surface.  

The Climate Change Committee (a non-governmental advisory body) said in a letter to Michael Gove: “The decision to award planning permission [up] to 2049 will commit the UK to emissions from coking coal, for which there may be no domestic use after 2035; 85 per cent of the coal is planned for export to Europe.”  Green Party MP, Caroline Lucas, described the project as a “climate-busting, backward-looking, stranded-asset coal mine”, and indicated it would be challenged.   

For more information, please see here.
Number of job applicants tumbling in construction sector

Data, provided by Broadbean Technology, shows that despite vacancies dropping 6% between January and October 2022, the number of applicants per vacancy has fallen at a far greater pace, down 44% for the same period.  The ongoing skills shortage across the sector is a key cause of the reduced applicants, but the report also suggests that the cost of living crisis and a general reluctance to move roles during economic uncertainty is also impacting application numbers.  Increased salaries are being relied upon to incentivise applicants, with average pay increasing by 4% between January and October, and salaries increasing 1% between September and October when signs of economic instability began to show.

For more information, please see here.

Gove backtracks on government cladding pledge

The £2bn Government pledge to fix cladding on buildings constructed in the last 30 years is under threat.  Michael Gove has reserved compromises made by his predecessors in the legal wording of the contract underpinning the pledge, causing housebuilders concern for the final version of the contract.  Housebuilders were asked to provide their final comments on the draft contract by 9 December, however this latest draft removed many of the compromises negotiated between the Home Builders Federation and the Department for Levelling Up, Housing and Communities which are key for the industry.  One source notes that “It’s the uncertainty of the contract that is the big problem for housebuilders. Gove could just re-write the agreement at any time. You can’t sign up for a commitment that you just have no way of knowing what the end result is.”

For more information, please see here.
FIDIC publishes 2022 contract reprints and guidance

The International Federation of Consulting Engineers (FIDIC), in consultation with legal and contractual experts and contract users, has published reprints of three of its key construction contracts, amending the previous 2017 versions.  The reprints are complemented by the brand-new FIDIC 2017 Contracts Guide 2nd Edition 2022 which provides practical, clause-by-clause guidance.  Vincent Leloup, chair of the FIDIC Contracts Committee, said the Reprints "aim to support the strongly growing market take-up of these contracts…in particular from the development banks, by providing clarity and certainty in their use".  FIDIC's president, Tony Barry, also commented that this was "a very significant development for FIDIC.  We are proud to provide the global engineering and construction sector with the contract documentation it needs to work smarter and more efficiently.”

The amendments take effect from 1 January 2023.  FIDIC advises users of its contracts to consider the amendments and the potential impacts on their documents.  The 2022 Reprints can be downloaded for free from the Publications section of FIDIC's website here.  Please reach out to Arash Rajai and our construction team with any queries on the FIDIC suite of contracts. 

For more information, please see here.

Thanks to Arash Rajai, Ben Hicks, Charles Underwood, Lauren Butler, Megan Grew and Oliver Bulleid for contributing to this week's edition.

Disclaimer: The information in this publication is for guidance purposes only and does not constitute legal advice.  We attempt to ensure that the content is current as at the date of publication, but we do not guarantee that it remains up to date.  You should seek legal or other professional advice before acting or relying on any of the content.