The Week That Was - 25 March 2022

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

HS2 costs increase again

Andrew Stephenson, the Minister for the new highspeed railway, HS2, has expressed concern on progress as current spending on Phase One stands at over a third of the project's target cost.   Actual and potential additional costs have jumped by £900m, given a £500m increase in contingency drawdown and £400m as a result of further cost pressures. To date, £1.3bn has been drawn down from the £5.6bn contingency fund, with the overall target cost of Phase One of the project (which covers the route from London to the West Midlands) being £40.3bn (of which £14.9bn has been spent).

Further design costs and slower than expected work in some areas have led to £800m in further costs, with £400m also required for the Euston station terminus, which has already been simplified from the original design.  £200m will be needed for changes to Network Rail infrastructure at Euston and Old Oak Common, with an extra £300m needed for other parts of the overall programme.  The financial impact of COVID-19 working restrictions on the project is yet to be formally costed, with the financial impact of the pandemic estimated at between £400-700m. 
The anticipated opening of Phase 1 of HS2 is between 2029 and 2033. 

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Multiplex returns to profit

Multiplex's European arm has reported a pre-tax profit of £2.6m for 2021, on revenues of £793m.  The figures mark an increase in revenue by almost a third, and a marked improvement from a pre-tax loss of £150m in 2020, which the company said was "directly attributable" to the COVID-19 pandemic.   Multiplex reported that, before extra administration and finance costs, this equated to a construction margin of 3.2%.  Multiplex's revenue does, however, remain lower than in 2019, when it stood at £872m, albeit with a £14m loss.

Multiplex added that its workbook stands at £2.7bn, up £200m from 2020.  This includes four residential projects worth £1.9bn, five commercial projects worth £675, and higher education projects worth £150m.  These projects include Grosvenor Square, the redevelopment of the US embassy in Mayfair.  

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RIBA update on PII 

The Royal Institute of British Architects (RIBA) has published an update on its efforts in raising concerns with the government on the challenges faced by architects in securing effective and affordable Professional Indemnity Insurance (PII).  RIBA believes the increasing cost and diminishing scope of coverage is a serious cause for concern and threatens the long-term future of the profession if action is not taken urgently.  In recent months, RIBA has raised the PII crisis with ministers, senior civil servants and key industry figures and it has established a working group to investigate the insurance challenge, led by RIBA council and board member, Jennifer Dixon.

The new group will lead a consultation process with contractors, brokers, and regulatory bodies to advance understanding of the risks and liabilities of practice.  It will also produce a set of recommendations for regulatory interventions to reduce ‘unintended consequences’ – helping to guide RIBA's lobbying activities.

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Government amends the Building Safety Bill

In January, the Government set out a number of amendments to the new Building Safety Bill ("the Bill").  It also set out three principles underlying its approach: (1) protecting leaseholders, (2) ensuring the industry pay to fix the problems they created and (3) improvements to the assessment of building safety risk.  

Under the amended Bill, there is a requirement that remediation is completed quickly and more leaseholders are exempt from paying remediation costs, including those related to non-cladding defects.  It is also intended to be easier to make payments for those making capped contributions towards non-cladding remediation. 

The Bill provides that Government will be given additional powers to ensure the industry pay for remediation, if they do not agree voluntarily, including powers to compel manufacturers to pay their share of the remediation costs.

There will also be improvements to the future building safety regimes. For example, there will be no duty to appoint a Building Safety Manager and separate Building Safety Charges for leaseholders will be abolished. Residents will also be allowed to appoint a professional director to support them in meeting their building safety duties. 

The Bill is currently sitting with the House of Lords and can be read in full here.

Thanks to Oliver Bulleid, Ella Crawley-Till and Ella Ennos-Dann 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.