Key developments in construction for 2023

Building Safety Act 2022 – new building control regime for higher-risk buildings The Building Safety Act 2022 received royal assent on 28 April, but much of the detail of the Act was left to secondary legislation. One such piece of secondary legislation is expected in the first half of 2023 and will implement the new building control regime for “higher-risk buildings”. This will include the introduction of two new approval stages – “Gateway 2” (a stop/go stage before relevant building works can start) and “Gateway 3” (a stop/go stage before occupation can commence). These stages will supplement “Gateway 1” (the existing planning approval stage) and strengthen building control for higher-risk buildings. The new regime will also introduce requirements that apply during construction, with “major changes” being subject to an approval process resembling Gateway 2. The government’s consultation on the new regime closed in October 2022 and its response is expected in early 2023. We expect the main focal points for the industry will continue to be: the duration and detail of the transitional arrangements; the information requirements of the Building Safety Regulator; and the BSR’s ability to handle the anticipated volume of applications and make decisions within the specified timeframes. Those negotiating contracts will need to consider what price and programme allowances contractors should be making to take account of the new regime and who, as between employer and contractor, should bear the risk of delays in decision making or rejection by the BSR, noting that rejection is presented as the fallback position. Sustainability and net zero carbon Despite the current economic headwinds, we expect sustainability and decarbonisation targets to remain at the top of the agenda for UK construction throughout 2023. The industry recognises the role it must play in averting the climate crisis – according to UK Green Building Council data, the wider built environment industry is responsible for 40% of global emissions – and the need to meet occupier demand for sustainable buildings that can deliver on ESG targets and help attract and retain talent. We expect this will result in the more widespread adoption of sustainability rating schemes, such as NABERS UK, which are based on operational performance and actual energy use, rather than design-based predictions. We also expect that the industry shift away from a linear “take, make, waste” economy towards a more circular one will continue apace, with a corresponding increase in the scale and complexity of projects incorporating reused building materials. The question for the industry will be whether established procurement practices and contract structures are still fit for purpose in this brave new world. Projects that propose wholesale demolition rather than adaption and reuse are likely to come under ever closer scrutiny from planners increasingly focused on reducing embedded carbon. Those negotiating contracts for deep renovation projects will need to consider the interface between old and new and who bears the risk of unforeseen adverse conditions in existing structures. Procurement In November 2022, a group made up of representatives from major contractors, consultants and leading private sector clients, launched the Private Sector Playbook. This follows on from the publication by the government of the Public Sector Playbook, which was updated in September 2022. The broad aim of each Playbook is to increase productivity in the construction industry and reduce conflict. While there are nuances between the two Playbooks they both promote the adoption by clients of procurement routes that encourage early contractor involvement, “fair contract terms” and the use of frameworks. The recommendations of the Public Sector Playbook are mandatory for government departments and arm’s length bodies, while the Private Sector Playbook is backed by major clients of the industry. As such, we are likely in the coming year to see contracts in the industry increasingly adopt the recommendations of the Playbooks. While inflation is still high for some materials and labour costs, there is evidence that inflation has now started to decline, a process likely to accelerate if the country moves into recession next year and demand declines. As prices and resultant inflation risk to contractors decline, we expect pressure on clients to accept fluctuations provisions in contracts to also decline. Similarly, we expect there to be less pressure on clients to utilise other procurement strategies that have been adopted to mitigate the effect of high inflation, such as substantial advance payments and payments for off-site goods and materials and the use of extensive provisional sums. Modern methods of construction Both Playbooks encourage the use of modern methods of construction as a more sustainable, more productive (in both time and cost), better quality and safer means of construction. While some major projects have been delivered successfully with MMC, insolvencies of MMC providers have worried some private sector clients and their funders. In addition, concerns as to whether MMC is able to deliver the productivity gains suggested have not yet been convincingly overcome. Concerns around the future reuse, and therefore sustainability, of MMC projects and well publicised worries expressed by the National Fire Chiefs Council in relation to fire safety of MMC high-rise residential projects also continue to slow the speed of adoption of MMC. MMC providers are working hard to overcome these concerns and the adoption of MMC by the private sector will continue to be hotly debated in the coming year. Marc Hanson is a partner and group co-head, and Adriano Amorese is a partner, within the construction group at Mishcon de Reya Image © Mathias Reding/pexels