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The Specialist Engineering Contractors\u2019 (SEC) Group \u2013 representing the largest value sector in UK construction \u2013 has expressed major concerns over the impact of COVID-19 on SMEs (which comprise 99% of firms in the construction industry).<\/p>\n
SEC Group is highlighting a number of concerns relating to sharp practices, disruption to repair and maintenance contracts (which represent more than half of construction industry output) and the weak balance sheets of the large tier 1 contractors with implications for payment security along the supply chain.<\/p>\n
Sharp practices<\/strong><\/p>\n Some evidence is beginning to emerge of supply chains being informed that they will have to bear the risk of any disruption or delay caused to construction works as a result of COVID-19.\u00a0 This means that SMEs may have to bear the brunt of any liquidated damages passed down to them.\u00a0 This is generally facilitated by onerous contracts which are par for the course<\/em> in construction.<\/p>\n Repair and maintenance contracts<\/strong><\/p>\n There is increasing disruption to repair and maintenance contracts especially those involving planned maintenance to mechanical, electrical, plumbing and lift installations.\u00a0 Many contracts have termination at will clauses which often enable contracts to be brought to an end without compensation.\u00a0 Moreover, there are safety implications to be considered.\u00a0 Lifts, for example, require regular servicing to comply with statutory safety requirements.\u00a0 SEC Group is asking for clear guidance to be issued from both government and the Health and Safety Executive.<\/p>\n Payment security<\/strong><\/p>\n Whilst public sector clients are being urged to ensure that all their payment obligations to their tier 1 contractors are discharged quickly there is concern that this will not be followed through along the supply chain.\u00a0 Moreover, any disruption or delay to projects could result in severe payment delays to supply chain firms which will be exacerbated by the fragile<\/p>\n balance sheets of the large companies.\u00a0 Supply chain contracts often allow for tier 1 contractors to suspend works without necessarily compensating their sub-contractors.<\/p>\n SEC Group\u2019s chairman Trevor Hursthouse called on all clients of the UK\u2019s construction industry to be on the look-out for distressed firms in their supply chains and ensure that, as much as possible, measures are put in place to alleviate such distress.\u00a0 He added:<\/p>\n