United Kingdom

1. Is there construction-relevant COVID-19 regulation?

The Coronavirus Act 2020 became law on 26th March 2020. This legislation provides the UK government with wide ranging powers to make orders in order to contain the virus. For construction purposes sections 48 and 50 to 52, together with the relevant schedules, are the most relevant. These give the UK government the power to close premises, restrict people from going to work and shut ports. This could affect construction sites, people working on said sites and material to be delivered from ports.

Until the UK Government exercise these powers to shut down construction sites the UK construction industry has to adhere to health and safety standards including under the CDM regulations.  For some works it may not be possible to make sufficient changes to working practices which comply with 2-metre social distancing guidance of the UK Government while complying with those regulations.

2. Subsidies and other government support for employer, contractor and other involved parties? (generic, high level only).

This matter has been largely dealt with on a UK wide basis. The UK government has introduces a number of different measures which assist the construction industry:

  • A Coronavirus Job Retention Scheme;
  • A grant for self-employed workers in the construction industry;
  • deferring VAT and Income Tax payments;
  • a Statutory Sick Pay relief package for small and medium sized businesses (SMEs);
  • small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
  • the Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank;
  • a new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans;
  • the HMRC Time To Pay SchemeMOT exemption.

Vehicle owners will be granted a six-month exemption from MOT testing, enabling them to continue to travel to work where this absolutely cannot be done from home, or shop for necessities. All cars, vans and motorcycles which usually would require an MOT test will be exempted from needing a test from 30 March 2020. Vehicles must be kept in a roadworthy condition, and garages will remain open for essential repair work. Drivers can be prosecuted if driving unsafe vehicles. For more information click here.

Filing accounts
Companies House have announced that businesses will be given an additional three months to file accounts to help companies avoid penalties as they deal with the impacts of COVID-19. Full guidance on applying for an extension can be found here.

Gender-pay reporting
Enforcement of the gender pay gap-reporting deadlines are suspended for this reporting year (2019/20) due to the coronavirus outbreak. The decision means there will be no expectation on employers to report their data.

In the UK the concept of "force majeure" does not have an independent meaning in law. However, it is nevertheless used in contracts. The two standard form contracts most commonly used in the UK construction industry are the JCT and NEC. Both contracts approach this topic slightly differently.

Force majeure is a Relevant Event in the JCT 2016 contracts, giving the Contractor a potential entitlement to an extension of time. The exercise of statutory powers by the UK Government or relevant authorities after the "Base Date" (a date specified in the contract) is also a Relevant Event if it directly affects the execution of the Works. However, there is currently some debate whether at this time these statutory powers have been exercised.  

In order to be entitled to a payment of money, the contractor has to point to a Relevant Matter or Changes. In the future there might be acts of prevention, such as delayed instructions or designs, which would classify as Relevant Matters. Also changes in statutory requirements after the "Base Date" may lead to Changes.

Under the NEC contracts, the situation is different. Although force majeure is not a term used or defined in the NEC it does deal with the concept of prevention which is similar. Clause 19 and the compensation event at clause 60.1(19) set out criteria that need to be fulfilled to establish whether there is a prevention event. These criteria are:

  • the event must either have stopped the Contractor completing the works or caused a delay;
  • neither party could have prevented it; and
  • an experienced contractor would have judged, at the Contract Date, to have had such a small chance of occurring that it would have been unreasonable for the Contractor to have allowed for it.

The change of law provision is optional at X2 in the NEC contract suite.  If X2 applies, then specific restrictions such as those under the Coronavirus Act 2020 would be a compensation event allowing time and money.

4. Does the Epidemic give rise to termination rights to either party?

Both the NEC and the JCT contain provisions which could result in termination due to the virus, but again they take slightly different approaches.

Under the JCT contract the Relevant Events noted above (force majeure or change in statutory power) are also potential termination events if they prevent the carrying out of the whole or substantially the whole of the uncompleted works for a prescribed period agreed by the parties. Two months is the default position, although this is often amended.

Under the NEC contract only the Client can terminate the contract if there is a forecast to delay, due to prevention, of more than 13 weeks. A bilateral termination right does exist in the event that the parties have been released under law from further performance of the whole contract. However, it may be difficult for either party to rely on this as an unchallengeable right to terminate where legislation has been implanted which would only temporarily affect performance of the contract.

5. Do the measures currently being taken in relation to the Epidemic amount to change in law? What are the price and time consequences?

As explained in the previous sections there is currently some debate among lawyers as to whether the current measures amount to a change in law. Whether the current government statements and guidance amount to a change in law may depend on the definition of 'law' in each contract. The prevailing view is that, where that contract definition does not extend to guidance, such guidance would not amount to a change in law. When government measures are taken under the new Coronavirus Act 2020 these are likely to be actual changes in law for contracts that are already in place.

6. Are there any other issues relevant to COVID-19 the construction industry should be aware of?

The Coronavirus Act 2020 gives separate powers to the devolved regions, Scotland, Northern Ireland and to a lesser extent Wales. While there has been no sign of this so far, it is in theory possible that these regions take different measures from the rest of the UK. The construction industry should therefore remain appraised of that possibility.

For more information on the topic please see:

Authors

Picture of Victoria Peckett
Victoria Peckett
Co-Head, Construction & Engineering
Chris Hallam
Christopher Hallam