Thursday, December 11, 2008

9 predictions for construction in 2009

Next year looks like being a tough one for construction on all fronts. Ben Thornycroft looks into his crystal ball and gives a forecast for 2009.

January Blues. There was little to lift the spirits of owners of construction companies in the Pre-Budget Statement and we can expect a very old January as many contractors fail to open after the Christmas break, either as victims of the continuing credit crisis or simply realising that there is no real point in struggling on when there is not enough work to fill their books. The accountants and administrators will have a busy New Year but some smaller contractors may pick up reasonable prices to finish off other peoples jobs.Whistleblowing. Watch out for a surge in whistleblowing instances in 2009 – prompted by the ticking bombs of health and safety issues and cartel accusations. If the OFT offers financial incentives of up to ВЈ100,000 in return for information which helps it to identify and take action against illegal construction cartels, there’s plenty of motivation for workers to get blowing - or whistling?Green Won’t Go. Don’t expect the recession to automatically result in sustainability being conveniently forgotten about. The industry will remain the subject of much scrutiny, particularly as the major projects propping up the industry are either of international significance (the 2012 Olympics) or directly linked to вЂsustainable’ initiatives themselves (energy projects or sustainable housing, for example). Being seen to be green will remain important.Subbies Lose Out. Further hold ups for Local Authority maintenance work will hit small contractors the hardest. Any spend on the kind of major projects that the Government is talking loudly about will have to be clawed back from somewhere. It’s pretty obvious that this will be from much-needed buildings maintenance, which may see schools and hospitals suffer, and will be a missed opportunity to put money into the pockets of smaller contractors and thereby stimulate the economy.Hold On To Your Talent. In the inevitable rush to reduce cost through redundancies, employers must remember that they still need the right people to see them through the tough times. Talent management and workforce planning will be as important if not more so than in the good times. Good people will still be able to move jobs and good people still need to be motivated and supported. Experience of the last economic downturn in the 90s was that employers were quick to reduce their workforce and were then lacking key skills when better times came along.New Contract Forms. Well, all the commercial managers and lawyers will have nothing else to do so why not spend the year trying to improve the JCT and in particular the NEC Form of Contract. In times of pressure the industry needs clear precise obligations which it can price and manage and uncertainty favours neither employer nor contractor. Some time from Government lawyers spent simplifying the unnecessarily complex PFI and BSF contracts would also be a welcome move.Priming Too Slow. The Government's undertaking to increase spending on schools, social housing and motorways will have little effect in 2009 with the normal planning and procurement process not taking effect until 2010. The increased energy efficiency spend for homeowners may be quicker but is again unlikely to impact before third quarter 2009. The market still has a way to go down before it comes back up and the general real cut in government spending after 2010 will mean the upward slope is very gentle.The Year Of The Bond. Not James but performance, as employers, increasingly scared of insolvency, will  require those recently unpopular performance bonds to protect their projects so at least the Bondsmen will have a happy new year.And If You Have Cash To Spare... This is the year to get those delayed repairs and extensions done to your house as you will be able to get a plumber or dry liner easily, the roofer will return your call, and the electrician will be available as our tradesmen move down market to keep their businesses going. Unfortunately, this may not work if you live in London as the tradesmen may still be dragged eastwards to Newham, with the Eastern Europeans heading even further eastwards to the stronger Euro on the continent.

Ben Thornycroft is a partner with Beachcroft LLP

Nashville job engine sputters