British construction companies are in confusion about working guidelines, amidst layoffs and difficulties in accessing the government loan scheme to support firms in trouble during the pandemic. There could be warnings for Australia’s experience with the construction sector, currently kept open.
The UK Construction Leadership Council, a joint industry and government body, issued updated instructions last Thursday ordering the closure of UK construction sites where workers cannot maintain a certain distance – and then withdrew them a few hours later following protests from the industry that the rules were impossible to follow.
Understandably, contractors are confused about how to respond to the coronavirus pandemic. Morgan Sindall and Wates have each furloughed around 1000 staff in response to it.
Wates’ chief executive officer David Allen issued a statement saying said the privately owned construction company firm’s finances were strong “and we will come through the unprecedented challenges created by COVID-19”.
Around 2.1 million people work in construction in the UK, 86 per cent of whom are employed in small businesses, and 40 per cent self-employed.
London Mayor Sadiq Khan has called upon the government to close down construction sites to stop the unnecessary movement of workers during the Covid-19 pandemic.
The only confirmed advice encourages companies to avoid “close working” but only offers general ideas on how to work where it is impossible or unsafe for workers to keep the required distance.
The industry has been in confusion since the lockdown began, since the government said builders could continue to work on site if they maintained social distancing — leaving it up to employers to work out how this could be done.
About 50 per cent of construction companies have closed their sites, according to Barbour ABI, an industry advisory group. Some, such as Kier, have restarted work after reviewing safety procedures.
David Frise, CEO of the Building Engineering Services Association, quoted in the Financial Times, highlighted how implementing safety rules can be difficult and expensive. “One of my members has 90 vans and he worked out that he would need to get 180 vans to keep working safely to meet that rule — where would he get them overnight?”
Contractors and subcontractors may also run out of cash if they down tools. Unless the government tells them to stop working, contractors have to make a difficult decision to either carry on working or stop and risk being liable for their own costs and contractual damages for late completion at a time when they need to keep cash flowing.
Banks blocking government support
To make matters worse, construction companies are not being offered the chance to apply for government-backed loans to deal with coronavirus-related disruption, according to the Federation of Master Builders, which has issued its own guidance on working practices.
The government’s Coronavirus Business Interruption Loan Scheme is part of a £330 billion (A$660 billion) finance rescue package for the UK economy and applies to firms with a turnover below £45 million (A$90 million) who must apply to the banks for it. Interest-free loans of up to £5 million (A$10 million) are available.
But in some cases banks are preventing construction firms from accessing loans by their banks. The federation found 10 per cent of its members who have applied to the scheme have been rejected, and 84 per cent have not yet had a response.
One Scottish contractor said their bank had tried to persuade them to take on a standard commercial loan, which does not have a 12-month interest holiday that the scheme does.
According to Construction News, Neal Edmonds, director of business advisory service ConstructNet, said none of the companies he works with in the sector have been able to secure a loan through the scheme yet partly because it is only intended for firms that were in a sound position prior to the start of March and it requires directors to give personal guarantees.
David Thorpe is author of the books Solar Technology and the new One Planet Cities. He also runs an online course for public servants, a Post-Graduate Certificate in One Planet Governance. He is based in the UK.