Lockdown 3.0: Construction continues but challenges remain

Construction to continue

People who work within critical national infrastructure, construction or manufacturing that require in-person attendance are permitted to continue to travel to work, as they were in the second lockdown in November 2020 and throughout the later months of the first lockdown in summer 2020.

This has been reiterated by the new Secretary of State for Business, Energy and Industrial Strategy, Kwasi Kwarteng, who, in an open letter to the industry, emphasised the major contribution to economic recovery the sector is making in continuing to work throughout the pandemic.

While this is good news for new and existing construction and infrastructure projects, which can progress despite the tough restrictions on other sectors, challenges nevertheless remain. These include the difficulties associated with operating sites in a safe and socially distanced manner, resource issues not assisted by the impact of Brexit and the on-going risk of insolvency within the supply chain.

Continued restriction on Statutory Demand enforcement

The temporary restriction on the enforcement of statutory demands introduced by the Corporate Insolvency and Governance Act 2020 has been extended to 31 March 2021.

By way of a reminder:

• Although statutory demands can still be served, the restriction prevents statutory demands being used as the basis of a winding up petition, thereby eroding the utility of the statutory demand as a tool for applying pressure on debtors.
• The restriction on using statutory demands as the basis of a winding up petition does not prevent winding up petitions being pursued. However, while the temporary restrictions are in place, a creditor will need to be able to demonstrate that Covid-19 has not financially affected the debtor or that the debtor would have been unable to pay notwithstanding Covid-19 in order to succeed.

Although alternative options are available to creditors, this extension places further pressure on those within the construction industry operating on tight profit margins who are already struggling to extract payment from debtors.

The road to recovery

In June 2020, Turner & Townsend estimated that the pandemic was causing around a 35% reduction in productivity on the UK's construction sites. This is a significant drop and some six months later the pandemic continues to have an impact, with the prospect of a "V" shaped recovery fading.

Although there is light at the end of the tunnel (with a vaccine being rolled out and a Brexit deal having been agreed), the road to recovery for the construction industry still looks like a bumpy one.

We will continue to report on developments in further insights as and when they arise.