Stepnell boss spells out industry’s dilemma

Contractors are battling to keep sites open and their workforces safe, while also trying to keep businesses afloat amid intense uncertainty.

Here the Enquirer airs one regional contractor’s view of the challenges being faced daily to meet the Government’s instruction to keep building.

Mark Wakeford, joint MD for Stepnell, argues the industry has to face them and keep construction going safely where possible.

He says: “Instruction from Government is clear. The whole industry needs to keep building, provided that it complies with Public Health England guidelines.

“Government urges us to get to sites and to continue working.

“The Construction Leadership Council has provided a Site Operating Procedure to guide site activities and Government is supporting leaders throughout the supply chain to win the moral argument to continue building.

“The issues for construction businesses are complex. Even with all employees furloughed, companies are accruing costs that have to be paid, but without income to pay for them.

“Those that are still working report that sites are operating at as little as 50% of past productivity.

“The reasons are numerous but include: fewer staff reporting for duty, longer and more complex tasks that must now comply with the Site Operating Procedures and crucially a lack of materials.

“The result is the same. Main contractors and tier one subcontractors are paying more in unrecoverable costs to complete their projects.

“Many companies in the industry will claim Force Majeure under their contracts.

“While time penalties will not be imposed, it does not absolve them of additional costs to complete their works.

“Main contractors will have to cover the costs of their preliminaries for additional time on site, plus increased costs of materials that we are already being warned of.

“A tier one subcontractor will have additional costs of site management, materials and increasingly labour. Both businesses are exposed to business overhead costs that cannot be supported from their site operations.

“Materials are increasingly in short supply. The large builders’ merchants are deciding which projects to service, concentrating on those they believe are of national importance, such as health.

“The reason is two-fold, there may be fewer staff to work in these businesses, but increasingly the manufacturers have stopped making anything.

“Site deliveries are effectively using up the last stock in the country and unless these manufacturers start up again the industry will grind to a halt.

“Unfortunately, this is unlikely to be easy. I know that Stepnell is waiting on slates from Spain, exports of which have been suspended indefinitely.

“Presumably the same is true for imported raw materials required by our manufacturers. We are after all not the only country struck by Covid-19.

“Labour, as we come out of this pandemic recession may also be ‘challenging’.

“Stepnell has lost an excellent gang of skilled Polish stone masons as we could not replace their supply of lime mortar.

“They have returned to Poland and I suspect that we are unlikely to get them back.

“Whether the hoards who will be de-furloughed in time will ever replace this team remain to be seen, but I doubt it.

“Bringing our industry back to life, after a long pause, will be difficult, long-winded and expensive as we fight for materials and skilled labour to complete projects, or pay to hold on to skills as the industry re-boots.

“In our industry, the main businesses who deliver projects are suffering a wide range of increasing costs that they neither foresaw nor are equipped to manage.

“Limited financial reserves within the industry may be stretched to breaking point and the number of insolvencies will likely increase, adding further distress within our industry.

“The bond market has already responded with increased costs, where bonds are still available.

“Government has responded with a range of loans, but these could be of little use in an ultra-low margin industry, unless Government can keep interest rates very low with flexible repayment terms.

“So, how long do we keep building? The answer has to be for as long as possible. We must keep demand up for labour and materials if we are to prevent the industry slipping into whole scale depression.

“Work closely with your supply chain and material suppliers as relationships forged now will keep you going as we come out of this mess.

“Talk openly and honestly with your customers, as none of us really know the consequences of this pandemic induced stall and honest conversations now can at least improve relationships and clear communication paths for when the pressures of re-opening or re-invigorating sites start.

“Above all though, keep your teams safe and follow Government guidance.

“One thing will be true, if you have lost your staff through illness or recklessness then recovery will be that much more painful.”

Mark Wakeford Joint MD for Stepnell.

Written by Aaron Morby - Construction Enquirer