4 Mar

How could coronavirus impact the construction industry?

Written by Clark Gardiner, Senior Construction Underwriter

Covid 19 is rapidly becoming pandemic with cases increasing on a daily basis. It is impossible at this stage to foresee the outcome of this virus, but the spread impact right now can be seen across most industries.
Construction is seeing a major reaction in terms of slowdown, reducing workforce, and supplier problems with a great deal of materials coming from overseas.
Whilst this is an off the cuff commentary based on what we’re seeing so far, it’s safe to assume we’ll see a number of commercial projects being extended due to this reduction. With force majeure being widely cited, it’s a time for employers and property developers to work much more closely with their contractors and sub-contractors early on in order to plug potential gaps to fulfil contractual obligations here in the UK particularly as we are at the early stages of the outbreak.
So then there is additional delay potential from the increased health and safety and duty of care for a workforce. Hygiene on most sites is almost impossible to micromanage to the level required without slow down. However, the health of individuals, in my opinion, must come first, even at the cost of a delay.
It’s worth mentioning that other situations like Zika, Swine flu and Ebola haven’t had the pandemic reach of Covid 19, particularly where a mandatory quarantine is in place – so, again, this is uncharted territory. It’ll be interesting to see if a slow down due to entirely postponed or shelved projects occurs like we saw during the Brexit process almost as a knee-jerk reaction to protect financial interests.
So, why is this an issue? Most projects are time sensitive to the point where a contractor has a full quarter, if not year, of projects lined up. The knock on being that subsequent projects could be lost and current projects may suffer by way of fines and penalties set out in the contract. The planning stage for projects won’t have catered for Covid 19 and so a lot of smaller risks won’t have the capacity to reorganise or re-plan in time to make a difference should their site be affected. The result may include smaller contractors going into administration and a long tail change to UK property development but time will tell here.
EL exposure increases significantly with employees working through what may not simply be a cold where not on a salaried position or agency work and similarly with BFSC who are responsible for their own financial situation and may be doing something similar whilst showing symptoms of the virus. There are several things which may happen from minor injuries due to fever etc to inadvertently shutting down the project site by transmitting the virus. With the government advising us to carry on as normal, it’s worth mentioning that a COBRA meeting was carried out to manage the position on it and it’s not being taken lightly, with 85 cases out of nearly 14,000 tested patients in the UK (at time of writing).
Finally, and arguably most importantly for insured parties, it will be paramount to check contract conditions and record any delays, shortage, or change meticulously in order for, where covered, any loss to be ascertained and fundamentally settled.

The views and comments expressed in this post are purely my own. 

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