Fears of contractor ‘instability’ mount amid gateway three delays

Delays to gateway three approvals for higher-risk buildings (HRBs) may trigger financial “instability” among contractors, according to industry analysts.

Their warnings came as a Freedom of Information (FOI) request showed 44 schemes are still awaiting a gateway three decision more than three months after those applications were submitted to the Building Safety Regulator.

The statutory timeframe for a gateway three decision is eight weeks.

Geoff Wilkinson, managing director of Wilkinson Construction Consultants, told Construction News: “For a lot of these [HRB] projects, the profit margin is low.

“It doesn’t take a lot of delay and additional bridging costs before you’ve wiped out any profitability.

“That will undoubtedly lead to further instability for contractors.”

He added: “I would be shocked if we didn’t see further contractor failures, particularly subcontractors.”

Wilkinson’s comments echoed previous concerns expressed by Rudi Klein, a barrister and former chief executive of the Specialist Engineering Contractors Group.

Speaking to CN last yearhe said gateway three delays would create additional costs for contractors, which they would likely seek to recover from the supply chain.

“Given that the retention often represents the margin on a job, many subcontractors could face severe financial hardship, especially at a time when work is in short supply,” he added.

The BSR has said that the only new-build projects to have reached gateway three are “transitional legacy cases”. These include buildings started under the old regime that have transitioned into the new regime, but which are going through gateway two and gateway three simultaneously and cannot be occupied.

CN understands that the BSR has found it “very challenging” to retrospectively process these nearly complete buildings in the absence of years’ worth of advice, records and inspection, and without those buildings having been through gateway two.

The regulator has said it has found “significant safety issues in some of these older projects and continues to work proactively with applicants to get the buildings to a state where they can be occupied”.

Under the post-Grenfell regime, gateway three is the final approval required before a completed higher-risk building – either 18 metres-plus or at least seven storeys tall – can be occupied.