How to be prepared for the age old problem of supply and demand

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15 September, 2021

Michael Chambers
Partner and Head of Department

A significant number of EU workers from the UK have left the construction industry leading to those in the industry facing a substantial shortage of workers in some specialist trades. In addition to this, more than 500,000 UK-born construction workers are expected to retire in the next 10 to 15 years leading to an ageing sector and a further shortage if the issue is not addressed soon.

Inevitably, with the above and the combination of the Covid-19 Pandemic and Brexit, there are likely to be significant delays across the board which many of us have been impacted by in some way, shape or form.

Whilst a shortage of skilled workers adds to the issues it is only part of the problem, there are also significant delays due to supply shortages in construction for both contractors and their customers.

With material shortages and price increases viciously impacting all, the main reason for the rise in price is the age-old formula of demand exceeding supply. It appears that this is an issue that will continue for some time to come and at least until material shortages can be controlled to some degree. But the unstable pricing for certain products is expected to continue for additional reasons such as increased shipping costs and delays at ports across the globe meaning that there are not shortages for all materials but simply logistical issues leading to the delays.

In addition to this with several homeowners unable to travel and working from home due to lockdown restrictions the appetite for home improvement has increased significantly adding pressure to an industry that was already facing delays.

What does this mean for you?

For those who have already entered contracts, the circumstances may be completely different to what you imagined when entering the contract.

A huge hike in prices may lead to margins being swallowed for contractors and unforeseen delays which may place the contractor at risk of exposure to liquidated damages and/or delay costs.

Alternatively, for the customers, this may lead to delays on their project which they simply cannot afford and increased costs that they have not budgeted for leading to potential disputes between contractors and their customers.

New contracts

For those preparing to enter into agreements, you should take extra care of the current situation and also look to ensure the agreement clearly states which party is to be responsible for supply and pricing delays amongst other unforeseen circumstances.

In certain instances, it may be that a contractor is said to be in breach of the agreement as a result of the actions of a subcontractor employed to carry out certain works, or works have been carried out to a substandard by the subcontractor placing the main contractor in dispute, it is important to know what your position is in these instances.

Whilst these are unique circumstances, it is crucial that you consider your position regardless of if you are the customer, contractor or even the subcontractor. It is likely that all new contracts will be heavily scrutinised moving forward in fear of such unpredictable circumstances should there be an issue and it is important to understand your stance before entering into an agreement with any party.

How to deal with any issues

Even if all the above is covered there are likely to be instances when all parties do not see eye to eye. This can happen for several reasons such as continual delays, penalties or even payment plans not being adhered to due to disputed reasons.

It is important that you look to seek expert advice as soon as practical to prevent any issues which may be resolved from the preliminary stage and prevent the matter from escalating leading to further costs.

JCT contracts are likely to have clauses that state what must be done in the first instance should an issue arise, it is important that you adhere to this so that you do not prejudice your position at any stage.

As a general rule, litigation should be considered as a last resort and other forms of dispute resolution should be considered such as mediation, arbitration or adjudication. In some instances, your agreement will state that certain processes (such as those mentioned) must be considered before commencing with proceedings, it is critical to instruct an expert from the offset to help guide you through the process.

If there is some disagreement as to how your project is being managed or if you are unsure what your position is or even if the other side have suggested one of the steps above it is important that you seek legal advice to assist you in making a decision that is best for you or your business both from a legal and commercial stance.

For more information contact Michael Chambers in our Commercial Litigation department via email or phone on 0333 207 0740. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

Learn more about our Commercial Litigation department here

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