CEWales E Bulletin July 2021

It’s been a different month (again) since our last newsletter and a tough week for many – our sympathies and best wishes go to everyone affected by WRW going into administration.

Whatever the background to bidding for work, one of the issues coming out of the sad demise of Dawnus and now WRW is the concept of fair payment in the supply chain. Yes, there are questions to be asked about WRW and Dawnus management decisions would they and perhaps more importantly their supply chain benefit if Project Bank Accounts (PBA WPPN 04/21 and WPPN 03/21) were in place?

As well as questioning the volatility of trading conditions and difficult business environments, as WRW’s own downfall has been attributed to ‘significant financial stress.’ It’s encouraging to see efforts to employ those affected into other positions within the industry as well as the proactiveness shown by Carmarthenshire County Council, who have been quick footed in proving to be a critical player in fostering cooperation across the supply chain. They have already put in place contingency plans to complete the developments affected by WRW’s administration and are supporting their partners as managers of the Southwest Wales Regional Contractors Framework. This situation highlights the increasing scrutiny over the struggle that construction firms must create enough value to sustain them through volatile business cycles, so It is essential we maximise the opportunities for knowledge sharing to meet the challenges ahead.

The industry is often forced to adopt a business model which devolves risk down the supply chain and focus on cash generation. This should not have to be the case if an enlightened approach is adopted on how clients procure their supply chain and rightfully bear the risk of price increases.

Supply issues have not changed this month and add further added strain on the sector, with demand outstripping supply, further worsened by strong pipelines (albeit this is positive!) amounting to large pre-orders. The Builders Merchants Federation and the Construction Products Association expect that high demand coupled with tight supply will sustain elevated prices throughout the year. We at CEWales would very much like to know how this is affecting you as an industry? Are supply issues affecting lead times, are you having to supply product substitutions and are you advising your clients early, letting them know of potential price increases? Please do engage with us by filling out our brief survey HERE.

On another note, my thoughts have been drawn into a recent UK Government petition to create tax incentives to favour retrofit instead of demolition and new build. The current tax system incentivises new build rather than reuse and retrofit. This petition seeks alterations to VAT law to favour refurbishment projects that reduce the carbon emissions of a building., as well as supporting low-energy products and passive house standards. 

This is a positive move in the right direction, however achieving net-zero targets and incentivisation via tax reform would be a great start but alongside showing carbon reduction both in use of the improved asset and also in the works needed to deliver those longer-term benefits could be a game changer on business cases for such schemes. Some 80% of the built environment of 2050 already exists (they say) so getting the right balance between retrofit and new build (but both low carbon) is a critical balancing act. In addition, it would be beneficial to see reform of building regulations to support the same agenda and, at least in Wales, better use of the planning system to require reports that align with the aims and ambitions of the Future Generations Act, including responding to Climate Change.

Welsh Government are however developing a WPPN that expands on the Decarbonisation Dashboard WPPN - providing practical guidance to support procurement professionals to drive decarbonisation.

Unfortunately, many of these issues are not covered by devolved powers. But we are fortunate that the Welsh Government is determined to think differently and pursue policies that are focused on decarbonising our environment.