The Week That Was - 12 July 2024

Welcome to the week that was, a round-up of key events in the construction sector over the last seven days.

What impact will the Labour victory have on the construction industry?

The construction industry has reacted optimistically but cautiously following the Labour Party's victory in the general election.  There are concerns by some in the industry regarding the lack of detail on manifesto pledges around promoting biodiversity and tackling pollution, as well as concerns as to whether Labour will be able to deliver on their green agenda and focus on net zero whilst still being able to deliver a 10-year infrastructure strategy, which includes the development of 5 new towns and clean energy sources. 

Several industry leaders have stated that what is needed from the new Government is certainty and a long-term vision to address decarbonisation, productivity, housebuilding and infrastructure.  There are also calls for Labour to address the skills shortage, provide easier access to apprenticeship funds and provide incentives to recruit and retain talent in the industry.   

A recent poll of construction professionals has shown that 52% expect more work after Labour won the election.

You can read more here.

Plans for reforms in Chancellor of the Exchequer's first speech

On 8 July 2024, in her first speech as Chancellor, Rachel Reeves outlined the planning reforms on the Government's agenda.  These reforms include restoring mandatory housing targets, a new taskforce to accelerate stalled housing sites which represent more than 14,000 homes and a commitment to fund an additional 300 additional planning officers across the country. 

The Secretaries of State for Transport and Energy Security and Net Zero will have the job of prioritising decisions on infrastructure and energy projects that have been sitting unresolved for long periods of time. The Government will set out its new policy intentions for infrastructure in the coming months. 

You can read more here.

Angela Rayner confirmed as new Housing Secretary

Angela Rayner has been appointed as the new Secretary of State for Levelling Up, Housing and Communities following the general election.  She has held the housing brief in Labour's shadow cabinet since 2023 and takes over from Michael Gove, the former Housing Secretary, who announced in May that he would not stand for re-election.  

Housebuilding was at the heart of Labour's manifesto, with the party planning to build 1.5 million new homes, boost affordable housing, improve planning laws and create new towns.

You can read more here.

Sanctions imposed on unnamed construction firm following delays in high risk projects

An unnamed firm, involved in a number of high-risk building projects, has been sanctioned by the Building Safety Regulator after repeatedly failing to meet safety and time standards.  Reasons for the sanctions included large delays in project timelines and significant safety violations. 

It is the Building Safety Regulator's view that these issues not only jeopardise the safety of workers and occupants but also undermine the integrity of the construction industry as a whole, therefore failure to comply with safety protocols will not be tolerated.

This incident is a reminder of the importance of following strict safety protocols and time schedules, particularly when executing higher risk projects. 

You can read more here.

Planning decision on 1 Undershaft Tower deferred following objections from Lloyds of London

Proposals for a 73-storey tower to replace the existing 23-floor building at 1 Undershaft have been deferred following objections from Bruce Carnegie-Brown, Chairman of Lloyd's of London.  Although the proposals had been backed by planning chiefs, the decision was taken to delay the application following Mr Carnegie-Brown's objections that the tower would "rob the city of a really important convening space."

The proposed tower, designed by architect Eric Parry, would be 309 metres tall, matching the height of The Shard, and would include an 11th-floor garden, a top-level viewing platform and restaurants which would be open to the public. 

The project has been the subject of a planning application for nearly a decade and the Corporation of London has said that a delay has been granted to give the developer more time to explore moving the building back to allow more public-space at the ground floor.  

You can read more here.

Supreme Court holds that collateral warranty is not a construction contract – Abbey Healthcare (Mill Hill) Ltd v Augusta 2008 LLP (formerly Simply Construct (UK) LLP) [2024] UKSC 23

The Supreme Court has unanimously held that most collateral warranties will not be a construction contract for the purposes of the Housing Grants, Construction and Regeneration Act 1996 ("the Act"), overruling the Court of Appeal's decision and also the TCC's decision in Parkwood Leisure Ltd v Laing O'Rourke Wales and West Ltd [2013] BLR 589 (TCC).

The central issue on appeal was whether the collateral warranty in the underlying matter was a 'construction contract' within the meaning of the Act, which would give rise to a right to adjudication. 

In its judgment, the Supreme Court held that the relevant collateral warranty was not an agreement  ‘for… the carrying out of construction operations’.  The Supreme Court held that where a collateral warranty merely promises to the beneficiary that the construction operations undertaken under the building contract will be performed then the warranty is not a construction contract for the purposes of the Act.  It is the building contract that gives rise to the carrying out of the construction operations; not the collateral warranty. 

In order for a collateral warranty to be construed as a "construction contract", the warranty must contain a separate or distinct obligation to carry out the construction operations for the beneficiary; not one which is merely derivative and reflective of obligations owed under the building contract.

The Supreme Court set out compelling reasons to supports its decision (many of which had been previously voiced by construction practitioners) that collateral warranties are not "construction contracts".  First, various payment related provisions of the Act are inapplicable to collateral warranties (unless step-in rights are exercised the beneficiary has no construction related payment obligations), second a right to refer a dispute to adjudication under a warranty can be agreed as a right between the parties rather than imposed by statue and finally often a beneficiary under the warranty has no control over how the construction operations are performed (eg it cannot instruct how the works are carried out, to order variations or to suspend or terminate the works).  The beneficiary simply “follows the fortunes” of the employer under the building contract, it is not an employer procuring construction operations in its own right.

This landmark decision will finally give certainty to the industry and will likely mean that most collateral warranties will not be "construction contracts" for the purposes of the Act.  

You can read the judgment here.

Authors: Ellen Ryan, Catherine Stead and  Emily Twomey

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.