Osborne puts Brexit damages clause into contracts
Andy Steele, CEO at Osborne spoke to Construction News- here is the full article, written and published by Construction News.
“Osborne has put clauses into the majority of its contracts so it will not have to pay for damages for problems on projects caused by Brexit, Construction News can reveal.
The company’s chief executive Andy Steele said the firm has started to put “Brexit clauses” into most of its contracts since October last year, when he felt it became likely that the UK would walk away from the EU without a deal.
In the clauses, Osborne would be granted an extension of time or changes to the contract from potentially “drastic changes caused by a Brexit event”, such as a fall in the availability of labour, supply of materials and other key risks, Mr Steele told Construction News.
He said the company is trying to protect itself, especially from damages.
The response from Osborne’s clients has been positive, Mr Steele said, as they recognise the need for a more “pragmatic approach” to approaching Brexit-related risks on jobs.
“There’s been some interesting conversations, but most [clients] are realistic,” he says. “There was some initial pushback, but most customers understand that we don’t have a crystal ball and that these are exceptional circumstances.”
He added: “How can a customer realistically, in a collaborative open relationship, turn around to their contractor and say: ‘Nobody understands what the impact of Brexit is going to be, but we want you to take all that risk on board’?
“We’re looking to work with the customer to find the most pragmatic way around this as and when it materialises.”
In October last year, Osborne stated it had been affected by ongoing Brexit uncertainty.
In its latest financial results, the contractor revealed several projects had been shelved as a result of Brexit and its turnover had dipped by 8.5 per cent to £318.3m from £348.1m.
Mr Steele also said MPs should accept Theresa May’s proposed deal with the EU, as extending article 50 will only create further uncertainty, which is not helpful for a confidence-based industry such as construction.
“To me, we should get the deal done,” he said. “We [construction] can’t deal with uncertainty. The worst thing, to me, would be to extend article 50 with no certainty as to what that means.
“Being in limbo land is no use to anybody.”
Mr Steele’s comments echo those made by Wates chief executive David Allen last week, who said he backed the prime minister’s potential deal over nothing at all.
He said clarity is needed to allow the industry to “plan for the future” and that the prime minister’s deal would enable companies to “continue to move materials and products without restriction”.
Mr Allen’s comments were made following the news that Build UK, the FMB, CECA, CPA and the Association for Consultancy and Engineering wrote to the prime minister to warn of the damage that a no-deal Brexit would cause to the industry.
The letter read: “The immediate effect of leaving without a deal in place is not knowing the cost of the materials and goods that construction projects rely on, or if they will arrive on sites across the four nations to keep projects of all shapes and sizes on track.”
It added: “Leaving in an unplanned way on 29 March with a no-deal Brexit could lead to a fall of at least 4 per cent this year and 2 per cent next year in the £163bn construction industry, [with] the greatest impacts felt on the house building and commercial sectors, which would both be expected to fall by at least 10 per cent in 2019.”
Latest PMI data showed this week that construction activity contracted for the first time in 11 months in February, with Brexit uncertainty blamed for the outright fall in work.
The last such fall was seen in March 2018 when the country was hit by heavy snow.
The index compiled by IHS Markit / CIPS read 49.5 for February, below the 50.0 threshold between expansion and contraction. This was down from 50.6 in January.
Activity shrunk in both the civil engineering and commercial markets in February, while the residential market saw a small increase in work.
Chartered Institute of Procurement and Supply (CIPS) group director Duncan Brock said: “In short, the foundations of the construction sector are crumbling under the weight of Brexit and businesses are switching to survival mode until the way forward is cleared.”
This article was written and published by Construction News.