An Expert Guide to the Impact COVID’19 on the Construction Industry

 

As the national economy has been hit hard by the outbreak of the COVID-19, also has the construction industry. It is facing dramatic and disruptive challenges regarding financial pressure, labour shortages and supply chain issues.

CMS Cameron McKenna, Nabarro, Olswang LLP has produced a guide over the impact the COVID-19 has on the construction sector.

Please click here for the full article.

1.) Is there construction-relevant COVID-19 regulation?

The Coronavirus Act 2020 provides the UK government with wide ranging powers to make orders in order to contain the virus. The Act give the UK government the power to close premises, restrict people from going to work and shut ports. This could affect construction sites, people working on said sites and material to be delivered from ports.

Until the UK Government exercise these powers to shut down construction sites the UK construction industry has to adhere to health and safety standards including under the CDM regulations.  

2.) Subsidies and other government support for employer, contractor and other involved parties? (generic, high level only).

The UK government has introduced various measures which assist the construction industry:

  • A Coronavirus Job Retention Scheme;

  • A grant for self-employed workers in the construction industry;

  • deferring VAT and Income Tax payments;

  • a Statutory Sick Pay relief package for small and medium sized businesses (SMEs);

  • small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief

  • the Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank;

  • a new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans;

  • the HMRC Time To Pay Scheme MOT exemption.

3.) Can the effects of the Epidemic be deemed to be force majeure (or similar legal concepts)? What are the price and time consequences?

In the UK the concept of "force majeure" does not have an independent meaning in law. However, it is nevertheless used in contracts. 

Force majeure is a Relevant Event in the JCT 2016 contracts, giving the Contractor a potential entitlement to an extension of time. The exercise of statutory powers by the UK Government or relevant authorities after the "Base Date" (a date specified in the contract) is also a Relevant Event if it directly affects the execution of the Works. However, there is currently some debate whether at this time these statutory powers have been exercised.  

In order to be entitled to a payment of money, the contractor has to point to a Relevant Matter or Changes. In the future there might be acts of prevention, such as delayed instructions or designs, which would classify as Relevant Matters. Also changes in statutory requirements after the "Base Date" may lead to Changes.

4.) Does the Epidemic give rise to termination rights to either party?

Under the JCT contract the Relevant Events noted above (force majeure or change in statutory power) are also potential termination events if they prevent the carrying out of the whole or substantially the whole of the uncompleted works for a prescribed period agreed by the parties. Two months is the default position, although this is often amended.

5.) Do the measures currently being taken in relation to the Epidemic amount to change in law? What are the price and time consequences?

Whether the current government statements and guidance amount to a change in law may depend on the definition of 'law' in each contract. The prevailing view is that, where that contract definition does not extend to guidance, such guidance would not amount to a change in law. When government measures are taken under the new Coronavirus Act 2020 these are likely to be actual changes in law for contracts that are already in place.

6.) Are there any other issues relevant to COVID-19 the construction industry should be aware of?

The Coronavirus Act 2020 gives separate powers to the devolved regions, Scotland, Northern Ireland and to a lesser extent Wales. While there has been no sign of this so far, it is in theory possible that these regions take different measures from the rest of the UK. The construction industry should therefore remain appraised of that possibility.

Please note that this analysis is based on CMS’ current evaluation and is a subject to further updates and amendments.

The information contained in this Expert Guide is for general purposes only and does not purport to constitute legal or professional advice from CMS or any other firm and as a consequence may not be relied upon.

 
 

For further information please contact:

Victoria Peckett, Partner, Co-Head, Construction & Engineering

Tel: +44 20 7367 2544

Christopher Hallam, Partner

Tel: +44 (0)161 393 4757

Priya Rawalconstruction, COVID-19, guidance, property