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Author: Lorraine MacKinder

President’s Column (June 2020)

The lockdown is starting to be relaxed and although things won’t be back to normal any time soon, a lot of construction sites are open (with the exception of some in Scotland) and most steelwork contractors are working. We all look forward to more restrictions being lifted over the summer, but I worry that The Chancellor, Rishi Sunak, has warned of a ‘severe recession, the likes of which we haven’t seen’ and some
commentators talk about 10% unemployment not just for the short term but for up to 5 years, it’s important to me that we don’t talk ourselves into recession.

President’s Column (May 2020)

We’re all acclimatising ourselves to new ways of working. For most steelwork contractors the restrictions have resulted in home working and social distancing in factories and offices, where being organised and planning work around the social distancing requirements is paramount. There were some mixed messages at the start of the lockdown, but this was a temporary measure to introduce better health and safety measures and the majority of sites in England and Wales are now open.

President’s Column (April 2020)

The world is facing unprecedented times. The effect of the coronavirus (COVID-19) pandemic on the health and wellbeing of the nation is still uncertain. Each day the number of people infected, and the number of deaths increases. We are also getting more stringent information on social distancing; pubs restaurants, clubs etc have been closed as have some parks and public spaces. We can only go outside for food, health reasons or work – but only if we cannot work from home. Further restrictive measures including ‘curfews and prohibitions’ on movement may yet be imposed.

The government and the Chancellor have introduced unprecedented peacetime measures to ensure companies and employees make it through the pandemic and are able to continue their business and social lives once the pandemic is over.

But what are steelwork contractors doing? Like most companies they are trying to follow government guidance, but this is changing rapidly, and the measures put in place today may be different from those needed tomorrow. These are very challenging and stressful times.

Most companies are doing their best to operate a business as usual approach by putting in place lots of measures to help prevent the spread of the virus including special cleaning in the office and workshop. Members of staff with existing conditions and those with children whose jobs permit it have been set up with systems allowing then to work from home. Companies report that all staff are being very supportive and realise that it is not just the Company’s responsibility to deal with the current circumstances, but they too have a responsibility.

However, the business as usual approach is becoming more difficult as site shutdowns become widespread. Nevertheless, it is important to ensure that the business remains viable during these difficult times and this includes reviewing active contracts and any contracts that the company is about to enter. It is important to review what the contract says about the following issues:

  • Use of alternative materials
  • Force majeure (if defined, sometimes epidemics or pandemics are included)
  • Relevant events/matters enabling claims for extensions of time and additional money
  • Delay and liquidated damages
  • Rights to suspend/terminate the contract
  • Notices – early warnings and notification of relevant events/compensation events in particular

Other issues that are being reviewed include what to do if employees do contract coronavirus, and if you do shut down the works how do you do so quickly and safely? How quickly and safely can companies react to receiving a notice to shut down your works on site from a main contractor? These are questions that some companies are having to deal with now. Another issue to consider is insurance and whether companies have insurance policies that could held recoup losses and, if you have this type of insurance, do you need to contact your insurers under the terms of the insurance policy?

The effect of the pandemic is likely to result in a recession although there is also talk of a depression. Strategic planning is therefore needed to ensure companies can weather the results of this economic shock.

These are very difficult times for the country, its people and the construction industry. The impact that this will have on the construction industry is unknown, but I feel that by pulling together the industry will come through this.

President’s Column (March 2020)

Sorry to start on a gloomy note, but I’m dismayed to read on a regular basis that main and specialist
contractors are going under or in difficulty.  These are long-standing companies whose expertise and skills are a great loss to the construction sector, at a time when skill shortages are becoming more obvious and when we need to attract a new and more diverse set of people into the industry. This mirrors the economic uncertainty and challenges of recent times with a softening in activity and delays in investment for large construction projects. Looking back to the start of 2018, the steel sector and others warned the Government about “the Carillion effect”; that the true ripple effect on the industry as a whole would not be felt until 12 to 24 months down the line, I think we are seeing this play out now.

We must focus on financial due diligence, good housekeeping and contract management. We must stand back on receiving an enquiry and think about whether we want to work for that company. What is the financial standing of my client, perhaps I can get advance payments, offer a retention bond or have monies set aside in trust in an escrow account or project bank account? Can I get credit insurance for the main contractor (and if not, why not?) Who is the main client on the project? When are payments due?  Will payments flow through properly and when will my retention be released? These are the sort of questions and assessments for a go/no-go decision and it’ll probably avoid having to face the aggravation of sorting it out after cash has left the business.

BCSA members can of course take advantage of free legal and commercial advice as well as the trade
association lobbying government and industry on their behalf on the commercial issues they are facing.

On a brighter note, over 3% growth is forecast in the steel sector for industrial buildings in 2020, and
over 6% in commercial offices. Annual increases are anticipated and the total UK consumption of structural steelwork is expected to grow to 925,000t by 2022, with power and infrastructure making significant contributions to the sector.

The Conservative Party made quite few promises during the General Election campaign about regeneration and infrastructure projects, it’s time to deliver on these promises. I’m encouraged to see a
clearer focus on our industry. The Construction Sector Deal, and the Crown Commercial Service are now rolling out the Framework for Construction Works and Associated Services across both central and local government departments and healthcare trusts.  Although I think it’s a missed opportunity not to mandate the use of project bank accounts.

The steel sector is (always) well-placed to take advantage of new opportunities in the private and public sector, particularly around offsite manufacturing. The need to balance offsite manufacturing, carbon reductions and total asset lifecycle costs has moved up the agenda.

Independent studies consistently show that steel is the most cost-effective framing solution for multi-storey construction in the UK market. Steelframed buildings can be easily adapted and avoid costly and environmentally harmful demolition and redevelopment. Its inherent adaptability and flexibility
also mean that future changes or extensions – even vertically – can be carried out with minimal disruption and cost. Steel isn’t a cost, it is an investment.

President’s Column (February 2020)

There’s little doubt that climate change and sustainability are gaining momentum in our domestic lives as well as in industry. Greta Thurnberg argues that humanity is facing an existence crisis and that climate change is fast becoming the number one issue for the world. Perhaps the scale of the fires in Australia has shown us this in some way

This shift in emphasis towards carbon reduction has put it in the spotlight for us all. As it’s not going away anytime soon, we’ll also be under this spotlight.  We may all have to change the way we live and work to reduce future carbon emissions otherwise extreme climate events will become more frequent and damaging.

The construction industry has a major part to play in this drive to net-zero carbon. We need to do more with less; maximise the efficient use of resources and move towards a truly circular economy. This is the Module D strategy, and the Paris Agreement brings carbon reduction into focus.

Steel is well-placed to play a crucial role in reducing the environmental impact of construction, and this shift in emphasis towards a reduction in carbon emissions is the major factor, and one most likely to have the best impact.

This characteristic that steel can be recycled or reused endlessly without detriment to its properties gives steel a high value at all stages of its life cycle. So it comes as no shock to find out that steel recycling is highly developed and highly efficient and has been in place for decades. Current recovery rates from demolition sites in the UK are 99% for structural steelwork and 96% on average for all steel construction products.

As you know, Steel is manufactured by two production routes, Basic Oxygen Steel (BOS) and Electric Arc Furnace (EAF), which together comprise a
single global system of supply to meet world demand. Both production routes include significant recycled content.

Energy consumption and carbon dioxide emissions from European steelmaking have already been reduced by 50% and 60% respectively over the past
40 years. The by-products from steelmaking, which include sludges, slags and dust are beneficially used by the industry in a range of products including roadstone, lightweight aggregates and as cementitious material used as a substitute for Portland cement.

European steel manufacturers are also leading the way in developing breakthrough technologies that will support ‘science-based targets’ and enable a global transition to a low-carbon economy.

As well as minimising the emissions associated with its products, the steel construction sector is also supporting designers and architects by providing guidance on how to get the most out of those products. The steel sector website steelconstruction.info, for example, contains a wealth of guidance on efficient design and construction. I guess we have always strived for that, but such efficient use of resources within our built environment is perhaps
now more important than ever.

President’s Column (January 2020)

The adage cash is king is never more real, cashflow is the life blood for any company. Recent developments with late payments, retentions and increases in the cost of Professional Indemnity insurance coupled with the proposals from government to impose reverse VAT on parts of the construction industry are stretching some companies to breaking point.

Many steelwork contractors are suffering from the doubling and trebling of PI insurance premiums. Insurance companies that are willing to offer cover are offering it for ‘aggregate’ claims and are no longer for ‘each and every’ claim. Undoubtably, the hardening
of the insurance market could have been affected by events at Grenfell that none of us want to see a repeat of, but I suspect there’s more to it than that. I’d like to see insurance companies take into account the professionalism and quality of specialist contractors.

All of BCSA’s members are subject to annual audits that focus on all the good practices that demonstrate good governance and professionalism.

In October 2020 government is proposing to introduce reverse VAT on construction services. I don’t think it will have many supporters and for many construction companies this will adversely affect both cash flow and working capital. BCSA lobbied for the postponement of the introduction of reverse VAT in 2019 and we’ll continue to lobby for it to be cancelled
altogether.

I keep hearing that the time to make payments is coming down. This is nonsense. Some main contractors are ‘gaming’ the system extending the time to make payment while others are issuing payless notices, as the 30-day period starts when the application for payment is agreed. Many of these issues could be addressed by the wider use of Project Bank Accounts, which clearly protects everyone the full length of the supply chain from clients to the specialist contractors.

The Government and the public sector in general could lead the way in enforcing the 30-day payment requirement in Public Contracts Regulations and, as in the devolved governments, mandate the use of PBAs for projects over a certain size. At the moment it seems to be an option, with the choice being taken very early as the project is being set up. Public bodies such as Highways England and Network Rail are leading the way on successfully using PBAs and abolishing retentions, lets have more of that please.

All of the above issues can and should be addressed and in my view the government should take the lead in demonstrating best practice on their projects. However, it remains to be seen if the new government has the will and determination to make these changes.  BCSA will liaise with the new minister for construction and the small business commissioner to make them aware of the major issues facing our members.

President’s Column (November 2019)

What’s going on in the construction sector at the moment? On one hand, we have the statistics implying its all doom and gloom, and on the other hand, many of my customers are saying they’ve never been busier. How do we reconcile these conflicting sentiments, and what do they mean for us all?

The IHS Markit / CIPS UK Construction PMI has been in the doldrums for months, sitting well below the 50 break even point. Their latest data release for October was 44.2, following on from September’s weak 43.3. Experian is expecting a flat year for construction this year, up 1.2% and the ONS new orders data for quarter 2 was 13.3% down, more than reversing the gains we saw in the first quarter of this year.

But when I speak to my customers, they all say they’re flat out and never been busier tendering. So what’s the story?

We all know that the large London commercial market remains soft; in the October UK Construction PMI survey, commercial activity fell for the 10th month running. However, I spend a lot of time on the road, and when I visit big cities like Manchester and Birmingham I see growth, commitment and a lot of big projects.

Cost, as usual, is at the fore and this is likely to account for the busy feel around tendering. When customers and main contractors are needing to drive costs down, it can often feel like the market is
busy, both for main contractors and sub-contractors. But there’s always a downside, with unrealistic cost
models creating financial instability in the sector and driving down quality. It also means that the  cowboys are awarded jobs that they’re not properly qualified for, and the project cost and schedule are never met anyway. It’s a real false economy.

We’re also continuing to see a high level of insolvencies throughout the construction supply chain. And in response, many of the main contractors have reshaped, re-positioned and restructured to meet what they think conditions will be in the short to medium term.

Of course, it is prudent to take note of the conflicting signals and prepare for a downturn in the short term. But it is just as important to look at the long term and prepare for a new environment in construction. One with different contracting models, reshaped clients and updated methods of construction.

BCSA is helping its members on both fronts – providing advice and lobbying on the short-term
commercial issues they are facing, while re-positioning steel, the original offsite framing material, for the
inevitable longer term changes to the construction sector.

President’s Column (October 2019)

One thing that really raises my blood pressure is hearing politicians using that old chestnut ‘metal bashers’ when in fact nothing could be further from the truth. But it’s sometimes hard for those outside the sector to reconcile their traditional image of the structural steelwork industry with the modern-day reality of digitisation, automation and business process improvement.

In fact, BCSA members are already expert in the use of technology and automation and are always on the lookout for what’s next. And BCSA’s Digital
Technology Working Group continues to investigate new technologies on behalf of the structural steelwork sector.

Software use is integral to the steel fabrication process, supporting activities such as internal knowledge and bid management, project planning, analysis and design, 3D modelling and BIM coordination.

At the start of the process, modelling and estimating software is essential to the bidding process for steelwork contractors, and I can see that its use is
increasing. This software creates a model of the steel frame so steelwork contractors can visually present the content of their bid alongside the  associated costs and provide insight into the sequence of construction works.

During the design phase, the structural steel is modelled to fabrication levels of detail. Materials Resource Planning software then processes data from
the model which is used for materials procurement, manages data to drive automated cutting and fabrication machinery, and plans logistics. These
technology advancements have allowed steelwork contractors to operate on a “just-in-time” basis.

Automated CNC machinery is standard today for each stage of the steel fabrication process. While every steelwork contractor has a slightly different process, it starts with the efficient and seamless transfer of 3D model information from the design office to the equipment in the workshop. I know that when visitors come into a structural steelwork workshop, they are amazed at how automated the fabrication process is.

So what for the future?

The sector is moving towards the adoption of full automation of all processes on the factory floor, utilising robots or cobots (collaborative robots). While this is some way off, some steelwork contractors are already moving into robotics.

Further technological advancements will drive the adoption and advancement of mixed reality and holographic technology, both in the factory and on-site.

And 3D printing, while still in the distant future for everyday steel structures, is coming on in leaps and bounds.

While we can’t predict the future, what I do know is that BCSA’s Digital Technology Working Group will continue to monitor these and other merging
technologies to help keep the structural steelwork sector at the forefront of digitisation, automation and efficiency.

President’s Column (September 2019)

From small acorns grow mighty oaks. This wellknown proverb applies perfectly to the UK’s structural steelwork sector.

BCSA has many substantial member companies who only a generation or two ago were just starting out and are now contributing significant amounts to the UK’s economic growth, productivity improvements and  employment. And BCSA’s small and medium sized member companies are individually and collectively contributing to UK PLC. While some of these companies will continue to remain SMEs, others will grow and become large individual contributors to the economy in their own right.

Or will they? Not if the government persists in bringing in new regulations and taxes that affect SMEs and construction sub-contractors disproportionately.

Construction sector sub-contractors have already had to deal with raw material price increases coupled with sluggish tender prices. They are managing skills shortages and the consequential labour cost inflation, and they have put in their own training and apprenticeship programmes to manage this. But as they grow in size and employ more staff, they are hit with the apprenticeship levy.

As we roll into the second half of the year, the government’s reverse charge VAT for construction subcontractors due to come into force on 1 October will lead to a loss of productivity, reduced cashflow and in the worst cases, tip some companies over the edge.

SMEs will be least able to cope, as they already spend on average 44 hours per year, which is the equivalent to six working days, on VAT compliance.

BCSA has joined 15 UK construction bodies in calling for a six month delay to the implementation of reverse VAT. BCSA has also written to the Chancellor asking the government to use this time to review its decision to impose reverse VAT altogether.

BCSA has calculated that for an average subcontractor turning over £15 million, reverse VAT will mean increasing negative cash flows, peaking at £262,500 in month three of the change.

BCSA believes that the government does not fully understand the implications of yet another financial blow to subcontractors and has not communicated the changes sufficiently to industry. This is borne out by data collected by the Federation of Master Builders that shows that over two-thirds of construction SMEs (69%) have not even heard of reverse charge VAT.

Let’s hope that the government sees sense and reconsiders yet another burden on construction subcontractors and SMEs, allowing more of those acorns to shoot.