A new forum of respected construction bodies has suggested a number of simple actions that the Scottish Government could introduce immediately to help with cashflow and protect jobs against the “crippling” background of coronavirus.
The Construction Industry Coronavirus (CICV) Forum – which represents the majority of contractor business in Scotland – has sent a joint letter to Fiona Hyslop, Secretary for Economy, Fair Work and Culture, urging her to support the Scottish construction sector.
Contractors can also assist by lobbying their own MSPs asking for their support using a letter which they can send to their local MSP.
The Forum – which also includes the Scottish and Northern Ireland Plumbers’ Federation (SNIPEF), the Civil Engineering Contractors Association (CECA Scotland) the Scottish Building Federation (SBF), the Federation of Master Builders (FMB), the Lift and Escalator Industry Association (LEIA), the Building Engineering Services Association (BESA), the Scaffolding Association, the Stone Federation and the National Federation of Roofing Contractors (NFRC) – says that without immediate action, the industry would face “business closures and loss of jobs and skills”.
In its hard-hitting letter, the group says: “Most of Scotland’s economy is made up of micro and small businesses, many of whom are already facing the closure of construction sites and a reduction in domestic work. This will undoubtedly lead to business closures, loss of jobs and skills at a time that Scotland can least afford and would seriously dent Scotland’s future economic growth.
“However, what we would do need Scottish Government to do, in this unprecedented time, is to use its influence with clients to ask that payments are accelerated as quickly as possible to ensure that the flow of cash will continue.
“It is also vital that clients ensure that payment must be cascaded down the supply chain to ensure that everyone who is legitimately due cash is paid more quickly. We would also request that all public sector clients immediately release any retentions due to boost cash flow in the sector.”
The CICV Forum is also asking the government to allow public sector clients to:
- Suspend the use of open tenders
- Use the Quick Quote method of tendering where possible
- Ask public sector clients to provide clarity on existing contracts and on the contractual position regarding delays
- Keep the momentum going to ensure the industry survives.
Alan Wilson, Managing Director of SELECT, said: “We are at the beginning of what is likely to be a prolonged and very difficult time for a sector which has already been struggling during recent years.
“If the Scottish construction industry is to survive this crisis, it is absolutely vital that the Scottish Government and public sector clients continue to procure a steady pipeline of work.
“Given the unprecedented challenges ahead, we would urge the Scottish Government to relax current procurement rules and procedures, in the short term, to help industry and public sector clients overcome the inevitable staffing issues all employers will face over the coming months.
“We’re also requesting that the government adopt a light touch, because the private sector may not have the staff to compile large specifications and the public sector won’t have the staff to mark it.”
Vaughan Hart, Managing Director of the SBF, added: “We are already seeing a significant impact on the way the industry is having to alter its mode of operations and we are sure there will be many more issues to be dealt with as things develop.
“Cashflow has always been a major factor for companies operating within the construction sector and this is even more important now, as work streams are restricted and the potential impact on future workload is unknown.
“Any measure which improves cash flow and easies the route to future work opportunities has to be looked at seriously in these times, otherwise we may not have the industry we will need to grow the economy, once the worst of the impact of the coronavirus is over.”
Fiona Hodgson, Chief Executive of SNIPEF, said: “These are desperate times for everyone. If we go into lockdown, firms will simply not be able to afford to keep staff on and with redundancies comes a loss of a skilled workforce which is already in short supply.
“The new CICV Forum will now share views weekly and feed into the Scottish Government. It is vital therefore that members keep us abreast of the issues they are facing as they develop.”
The move comes after Aileen Campbell, Cabinet Secretary for Communities and Local Government, this week announced a package of measures to help Scotland’s communities cope with the “worldwide public health emergency”.
This included an additional £350million for local hardship funds, £45million for the Scottish Welfare Fund and a £20million Third Sector Resilience Fund to help organisations cope with cashflow.
Ms Campbell also urged the UK Government to reconsider its approach to welfare and increase levels of Universal Credit, statutory sick pay and reverse its cap on children, saying these were “not normal times”.
Alan said: “We have now set up an online advisory group where CICV Forum members will share intelligence, advice and information across the whole sector. We will also use it to keep the government informed.
“These are not normal times, which is why it is vital that the construction industry is helped with these vital issues, just as other areas are being assisted.
“Now is the right time for Scottish Government to show leadership and take bold and decisive actions as quickly as possible to keep the industry afloat.”
Meanwhile. public sector clients have been ordered to settle construction bills straight away and still pay for work even if sites are suspended.
The Cabinet Office has issued a new procurement policy note in the wake of the coronavirus crisis, ordering all public sector clients to:
- Urgently review their contract portfolio and inform suppliers who they believe are at risk that they will continue to be paid as normal (even if service delivery is disrupted or temporarily suspended) until at least the end of June.
- Put in place the most appropriate payment measures to support supplier cash flow; this might include a range of approaches such as forward ordering, payment in advance/pre-payment, interim payments and payment on order (not receipt).
- If the contract involves payment by results then payment should be on the basis of previous invoices, for example the average monthly payment over the previous three months.
- To qualify, suppliers should agree to act on an open book basis and make cost data available to the contracting authority during this period. They should continue to pay employees and flow down funding to their subcontractors.
- Ensure invoices submitted by suppliers are paid immediately on receipt (reconciliation can take place in slower time) in order to maintain cash flow in the supply chain and protect jobs.
The emergency guidance comes into force immediately and will last until 30 June.
The Cabinet Office said: “The current outbreak of COVID-19 is unprecedented and will have a significant impact on businesses of all sizes.
“Many suppliers to public bodies will struggle to meet their contractual obligations and this will put their financial viability, ability to retain staff and their supply chains at risk.
“Contracting authorities should act now to support suppliers at risk so they are better able to cope with the current crises and to resume normal service delivery and fulfil their contractual obligations when the outbreak is over.
“It is vital that contracting authorities pay all suppliers as quickly as possible to maintain cash flow and protect jobs.
“Contracting authorities should also take action to continue to pay suppliers at risk due to COVID-19 on a continuity and retention basis. Contracting authorities can consider making advance payments to suppliers if necessary.”
- A full copy of the Cabinet Office note can be read here.