What does construction have in store in ’24?

Marc Hanson and Adriano Amorese tackle the continuing developments under the Building Safety Act 2022, the net zero drive and other hot topics in the construction sector. Long-awaited secondary legislation to supplement the Building Safety Act 2022 came into force at the start of October 2023. Among other significant changes, this implemented the new building control regime for higher-risk buildings. To give the industry time to acclimatise, and the Building Safety Regulator time to get its house in order, the legislation included transitional provisions allowing certain projects involving HRBs to remain under the old building control regime and avoid the more stringent requirements of the new one.  Since October, the industry has been scrambling to ensure that live projects involving HRBs fall within the transitional provisions. This will continue into the early part of 2024 as clients aim to have projects sufficiently progressed by 6 April, at which point the transitional arrangements will come to an end and the resilience of the BSR’s resourcing model and processes will be properly tested for the first time. Despite reassurances from the government in its August consultation response, concerns remain around the BSR’s ability to handle the anticipated volume of applications and make decisions within the statutory determination periods.  It is hoped that by the end of 2024 a market position will have emerged around the programme allowances that should be made for the new Gateway 2 and Gateway 3 approval stages and how the risk of delays by the BSR should be shared between clients and contractors. The immediate response has been to build in allowances aligned to the statutory determination periods – planning for the worst and hoping for the best. However, as confidence in the BSR grows, and parties heed the government’s calls for early engagement and dynamic information sharing with the BSR, we expect parties will start to build in shorter allowances and rely more on contractual extension of time mechanisms.  Sustainability and net-zero carbon Despite the continuing economic and geopolitical headwinds, it is expected that decarbonisation will remain a top priority for the industry throughout 2024 and beyond. The collective will to green the industry (which is one of the most carbon-intensive) and the expectation that buildings with strong sustainability credentials will attract a green premium should continue to drive change in the absence of coherent policymaking and incentivisation by government.   Early 2024 will bring the publication of the UK Net Zero Carbon Buildings Standard, which has been developed by a cross-industry group under the stewardship of David Partridge. The standard will provide a single agreed definition and methodology for determining what constitutes a net-zero carbon building. Benchmarks based on operational energy and embodied carbon data sets will provide much-needed clarity and standardisation in the absence of meaningful statutory thresholds. The standard should also help the industry to self-police more effectively and weed out instances of greenwashing. The industry will be waiting with bated breath as Marks & Spencer pursues its judicial review of Michael Gove’s decision to block the demolition and redevelopment of its store on Oxford Street, W1. In the meantime, the question of whether embodied carbon should be prioritised over operational carbon and what constitutes due consideration of alternatives to demolition will remain highly politicised. While the industry appears largely united behind a retrofit-first, not retrofit-only ethos, it is expected the secretary of state’s decision will result in planning proposals with a far greater emphasis on retrofit and reuse than might otherwise have been the case. Expect to see a proliferation of retained facade schemes in Westminster. Politics As we move towards a general election, we are likely to see headline-grabbing policies and proposals for the construction industry from both the government and the opposition. The axing of the second phase of HS2 has already had an impact on market sentiment and is likely to lead to a greater availability of resources and capacity in the industry. While the government is committed to reinvesting the money “saved” in other projects, the majority of these are not “oven-ready” and, as such, there will be a risk of a slowdown in work in the infrastructure market. With the government looking to save money for potential pre-election tax cuts and the Treasury openly sceptical about the ability of the public sector to deliver infrastructure projects in a cost-effective way, contractors looking to pivot from higher-risk commercial private sector work to public sector work might find themselves disappointed by a lack of opportunities. The election of a Labour government may not change this, given the conservative approach taken to date by the shadow chancellor over increasing government spending.  All political parties are now sensitive to political pressure in relation to payment practices in the construction industry. While it has stopped short of banning retention, the government has stated that companies already required to report on their payment practices, pursuant to the Reporting on Payment Practices and Performance Regulations 2017, will now also need to report on how they use retentions and how swiftly they pay them. Labour has been more hostile to retentions, but whether a commitment to abolish the same will be made in its election manifesto or, if it is, survive the baleful eye of the Treasury under a Labour government remains to be seen.   Finally, spring 2024 will see the publication of the long-awaited updated JCT suite of contract documents. The updates will include new provisions relating to the 2022 Act, sustainability, and provisions making sure the contracts reflect best practice as set out in the public and private sector playbooks.  Marc Hanson is a partner and group co-head and Adriano Amorese is a partner within the construction group at Mishcon de Reya Photo © Syaibatul Hamdi/Pixabay