Aberdeen is a city dominated by the oil and gas industry, and many of my friends work for oil and gas companies or the law firms which advise them. It's perhaps not fair to say that the industry hasn’t been hit at all by the recession, but it has held up remarkably well. However, I have been on a different path and spent the first six months of my traineeship getting to grips with a construction industry which is in turmoil.
So is it all doom and gloom for the construction industry and the lawyers who advise them? From my perspective, perhaps because I never saw "the good times", it doesn’t feel that way. In many respects lawyers are even more important in the hard times, either to provide greater protection or help develop new and innovative ways of working.
The truth is, there is far greater risk in construction now. Parties to contracts can and do become insolvent which can result in delays to work, the loss of money paid which cannot be recovered in administration. In the case of a serious contractor becoming bankrupt, there is serious risk of the abandonment of entire projects.
The only real protection against any of these eventualities is to have carefully considered, well drafted and properly executed contracts in place to try and account for these risks as much as possible. This makes for a substantial amount of legal work as it is even more crucial now that these are all put in place.
There has also been greater scope for (or perhaps need of) innovation. For example I have seen a number of contracts which call for far more collaborative relationships between employers and contractors, what in England they might call 'alliancing'. A great example of this was in a recent project for the creation of a new whisky distillery in the north west of Scotland where there is an unusual but rather clever mechanism whereby if the contractor can come in under budget then he will receive two times corresponding increase in his profit margin. This is a win/win for both parties, the client will hopefully get a project delivered under budget (a very rare thing indeed) and at the same time the contractor makes more money. Now of course this a clause which could have been used in "the good times" as well, but the truth is, there was just much less incentive at the height of the market, when funding and projects were readily available.
Another recent development I have been occupied with, involved a novel funding mechanism whereby the contractor is not being paid upfront, but is entitled to a share of the profits of the units developed. This requires the contractor to take a longer term economic view but has allowed for development to go forward where it might have been difficult if not impossible to secure adequate funding.
Necessity is the mother of all invention and there is no doubt that there is a great deal of necessity in the current market. With that, there is huge scope for invention. The businesses which respond to this (and their lawyers!) will be the winners in the end, and I can see a future where the construction industry looks very different from its pre recession state, but all the better for it.