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“Severe consequences” face cladding companies who refuse to pay for remediation

09 May 2023

SHAREHOLDERS IN three cladding companies whose “shocking practices” were uncovered in evidence heard at the Grenfell Tower Inquiry have been warned by the Government that the manufacturers they invest in will face “severe consequences” if they do not come forward with a comprehensive financial package to fix unsafe buildings.

Michael Gove, the Secretary of State for Levelling Up, Housing and Communities, has written to shareholders and investors in Kingspan, Arconic and Saint-Gobain – namely Vanguard, Blackrock and Fidelity Management and Research as shareholders and investors including Norges Bank (the Central Bank of Norway) and Caisse des Dépôts et Consignations – and urged them to use their “position of influence” to encourage the firms to “engage constructively in helping us reach a just resolution for all concerned.”

Shareholders have been warned that, if the manufacturers do not come forward with a comprehensive financial package, then the focus of the Department for Levelling Up, Housing and Communities “will be trained upon them” and “the consequences [for these firms] are likely to be severe.”

The letters add that there will likely be consequences for shareholders’ reputations, in addition to their financial stake, if Gove is forced to use “the legal and commercial tools available” to ensure the position of the cladding companies “becomes extremely uncomfortable.”

Gove has also stated that he is considering whether further tools will need to be handed to regulators and/or the Government.

“I have always been clear that those responsible for the building safety crisis must pay,” asserted Gove. “Despite the fact that their products continue to put lives at risk, some cladding firms have no intention of doing what’s right and addressing their moral and financial obligations to innocent residents.”

He continued: “We ask responsible investors to use their influence to encourage these companies to come forward immediately with a comprehensive financial package for remediation work. It cannot be right that cladding companies continue to profit, while so many innocent and hard-working individuals face financial hardship and misery.”

In conclusion, Gove noted: “Those cladding companies who fail to do the right thing will face severe consequences. I will use all commercial and legal tools available to me to ensure that they take responsibility.”

Lack of contribution

To date, the three construction product manufacturers – who together were responsible for manufacturing the majority of the cladding used on Grenfell Tower – have not contributed a penny to the cost of fixing buildings in the UK that their products have made unsafe.

On GOV.UK, the Department for Levelling Up, Housing and Communities comments: “Evidence [given] at the Grenfell Tower Inquiry uncovered shocking behaviour by these three companies, including the sale of flammable products that were wholly inappropriate for their end use, [the] apparent misselling of construction products through inaccurate marketing information and the misappropriation of safety test results, thereby perpetuating the sale of high-risk products on the market.”

The Secretary of State has written to the bosses of Kingspan, Arconic and Saint-Gobain over the last month to ask them to meet officials from the Department for Levelling Up, Housing and Communities and explain how they will scope, identify and the pay for remediation works. The invitation followed Kingspan stating publicly that the business would be willing to pay for remediation costs where its products had been used inappropriately.

While Kingspan agreed to meet Government officials, none of the named businesses have committed to any new remediation funding.

Developer Remediation Contract

Efforts to make cladding companies pay are proceeding in tandem with measures used by the Department for Levelling Up, Housing and Communities to ensure developers and freeholders contribute towards remediation costs for unsafe buildings.

At present, there are 46 signatories to the landmark Developer Remediation Contract, which commits developers – for the first time in law – to fix all life-critical fire safety defects in English buildings over 11 metres tall in which they had a role in developing or refurbishing.

Further to this, the Department for Levelling Up, Housing and Communities’ Recovery Strategy Unit has ramped up litigation against “irresponsible” freeholders who will not remediate buildings for which they are responsible (one such, according to the Government, is GreyGR, which is owned by billion-pound railway pension fund RailPen).

Testing for construction products

The Department for Levelling Up, Housing and Communities has also published the results of an Independent Review conducted by Paul Morrell and Anneliese Day KC, which assesses the current testing regime for construction products.

The report was commissioned in response to evidence heard by the Grenfell Tower Inquiry about the behaviours of manufacturers and those responsible for advising on the fire performance of products, with allegations including “serious failings in the system” for testing construction products that involved cladding.

Commenting on the report, Peter Caplehorn (CEO of the Construction Products Association) observed: “We are very pleased to see the publication of this Independent Review. Paul has immense experience from the many senior roles he has occupied in both industry and Government. We respect him for his intellect, understanding and objective approach to the challenges facing our industry.”

Caplehorn continued: “This report should be required reading for policy-makers and industry leaders alike, coming as it does at what is a critical time not only for the future of the UK’s product testing and certification sector, but also for the wider culture and practices of UK construction as a whole. The recommendations outlined cover a wide range of urgent issues. The Construction Products Association and its members will be focusing on developing the necessary responses and actions in consultation with Government officials.”

In addition, Caplehorn noted: “It’s also very pleasing to see solid support for the work we are doing in developing and implementing the Code for Construction Product Information, which is a fundamental foundation for reform in the sector.”

The Department for Levelling Up, Housing and Communities will now “carefully consider” the recommendations of the Independent Review and set out proposals for reforms in due course.

*The full Independent Review can be accessed online at https://www.gov.uk/government/publications/independent-review-of-the-construction-product-testing-regime