The Week That Was - 21 April 2023
Welcome to The Week That Was, a round-up of key events in the construction sector over the last seven days.
Construction paused on HS2 tunnel
A joint venture between Skanska, Costain and Strabag has confirmed that work on the 7.2km long Euston Tunnel, between Old Oak Common and Euston, which had been due to begin in 2024, has been delayed. The news follows doubts over whether the new Euston station, which had been intended as the London terminus for HS2, will be built. It was revealed earlier this year that the projected cost of the station had doubled to £4.8bn. It also follows the Government's decision to prioritise the line between Old Oak Common and Birmingham.
A revised start date for the Euston Tunnel has not been confirmed, although preparatory work for the tunnel, including creating a tunnel between Old Oak Common and North Acton to deliver material to support the construction of the Euston Tunnel, has continued.
Phase 1 of HS2 (between London and Birmingham) is currently anticipated to be operational between 2029 and 2033, with Phase 2a (the line between Birmingham and Crewe) pushed back to between 2035 and 2041.
For further information, please click here.
Housing secretary blocks scheme in Tunbridge Wells
The Housing Secretary, Michael Gove, has refused permission for Berkeley Homes to build 165 homes in the Crane Valley, near Tunbridge Wells, despite a planning inspector recommending it go ahead following a public inquiry. The development would have comprised one and two bedroom apartments, and two to five bedroom houses, and included 40% affordable housing.
However, the decision notice issued by the Government stated: "Whilst [the Secretary of State] agrees with the inspector that the proposed development would deliver landscape enhancements, he does not find the proposal to be of a high standard which has evolved through thoughtful regard to its context. Overall, he does not find that the scheme is sensitively designed having regard to its setting". The decision notice added that "the design of the proposal does not reflect the expectations of the High Weald Housing Design Guide, being a generic suburban nature which does not reproduce the constituent elements of local settlements".
For further information, please click here.
Four times as many building firms being wound up
In 2022/23, 185 construction businesses were on the wrong end of winding up petitions made by builders merchants after steep increases in the prices of materials meant they couldn't pay their bills. This was a 320% increase on the number of businesses wound up by the largest 20 builders merchants in 2021/2022.
This reflects the pressure on the industry generally. There was a 49% increase in the number of construction sector insolvencies in the 12 months leading up to 31 January 2023, according to statistics published by the Insolvency Service. A total of 4,135 construction companies were declared insolvent compared to 2,776 last year.
Patrick Lannagan, partner at international accountancy firm Mazars, said in the press: “Raw materials, energy, borrowing, labour – it’s all become more expensive. Add that to the long-term problem of late payment and the financial stress is enormous.”
For further information, please click here
Court ruling on the meaning of "days" in JCT contracts in the context of payment applications
In Elements (Europe) Ltd v FK Building Ltd [2023], a sub-contractor applied for payment in the sum of £3,950,190.52 in respect of an Interim Valuation Date of 25 October 2022. The sub-contractor emailed its application at 22:07 on 21 October 2022.
The main contractor refused to make payment on the basis that the application was received later than "4 days prior to the Interim Valuation Date" under clause 4.6.3.1 in the JCT contract. It argued that 4 days meant 4 "full days" and that the deadline for application was therefore 20 October 2022.
The Adjudicator agreed with the sub-contractor that the deadline had been the 4th day before the valuation date, i.e. 21 October 2022. During enforcement proceedings, Constable J endorsed that approach. Clause 4.6.3.1 did not require 4 full or clear days. The sub-contractor was entitled to serve an application at any time on 21 October 2022.
Click here for the judgment.
Improving consent process for major projects
The Natural Infrastructure Commission has issued its report setting out recommendations to improve the consent process for Nationally Significant Infrastructure Projects (NSIPs).
The report identified that, since 2012, consenting times under the current process have increased from 2.6 years to 4.2 years and that the rate of judicial review has increased to 59% from 10%. The report attributes this, in part, to the lack of updates to National Policy Statements which it says has resulted in the role of the Planning Inspectorate shifting from inquisitor to arbiter interpreting old and subjective guidance.
The recommendations, which the report says could ensure consenting for all major projects is completed within two and a half years, include five-yearly reviews of the National Policy Statements, bringing onshore wind back into the NSIPs system, and introducing a data sharing platform for environmental data.
The report is available here.
Government scraps smart motorways
The Government has confirmed that plans for new smart motorways, including 11 that have already been paused and three more earmarked for construction between 2025 and 2030, will be removed from Government road building plans. The Department for Transport said the decision was due to financial pressures and the lack of public confidence felt by drivers. Works to the M56 and M6, which are already over three quarters constructed, will be completed.
The Department for Transport also stated that the cost of constructing future smart motorway schemes had been estimated at more than £1 billion but that the Government and National Highways would continue to invest £900 million in further safety improvements on existing smart motorways.
The press release is available here.
Our Construction and Real Estate team have prepared a user-friendly guide to the Building Safety Act 2022
The Act overhauls existing regulations, creating lasting change by establishing the framework of how buildings should be constructed, maintained, and made safe. The Act also delivers far-reaching protections for tenants and residents with an ambitious toolkit of measures that will hold those responsible for building safety defects to account. As such it is important that all organisations with exposure to the built environment are aware of the implications of the Act.
Our client guide aims to provide a high level visual summary of the Act, and lead you step by step through the key changes and highlighting what it means for you.
Please click here.
Authors for this week's edition: Chris Brewin, Paul Smylie and Oliver Bulleid
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.