Recent industry news makes for worrying reading as insolvencies within the construction industry continues. A recent report by the Building Cost Information Service (BCIS) highlights a number of factors contributing to this trend including inflation, high interest rates and increased labour costs. As the report mentions this is not good news for developers as these factors all serve to drive construction costs upwards and/or risk contractor insolvency.
If the worst transpires and developers face contractor insolvency mid-project, there will be two vital considerations: protecting the project (both in physical terms such as security and insurance and in terms of successful completion) and seeking recoveries from third parties for the extra over costs of completion.
Contractor insolvency can often occur suddenly despite the warning signs during the project making it highly likely that specialise advice will be needed, and indeed advisable, in order to fully protect the developer's interests.
All standard construction contracts deal with insolvency and should therefore be the first point of reference should developers need to deal with an insolvency on a project.
And equally, the continuing high numbers of insolvencies in our industry is a huge concern. A reduction in contractors leads to reduced construction capacity, potentially less competition and upward pressure on tender costs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
