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The construction industry is immersed in a storm of circumstances impacting the viability of projects across the UK. Employers and investors that have previously expected contractors to accept contract terms fully wrapping all the risks on construction projects for an all-in lump-sum price are now finding this approach unrealistic. The industry is witnessing the cumulative effect of an ongoing shortage of skilled labour, rising inflation rates, residual covid-19 impacts, rising energy prices, a slow planning system and a hardening professional indemnity insurance market. 

Main contractors are already struggling to deliver current projects procured on lump-sum contracts that do not allow for recovery of rising inflation costs. The prevailing contract approach previously adopted was for contractors to be held to existing lump-sum pricing arrangements in their upstream contracts, without any allowance for fluctuations. This is a particular concern for contractors that are yet to secure certain packages on current projects. Subcontractors are not only changing their prices but also demanding more favourable contractual terms.

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