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Brexit - How the Construction sector must keep calm and carry on!

Tags: Construction & Property, blog

By Eliot Davies

Another day, another circus upon the Brexit negotiation table! But while the implications of a looming ‘no deal’ exit remain at the forefront of businesses across the UK, the question remains: ‘What will happen to the UK’s construction sector?’

Although infrastructure investment and the demand for housing indicate that the sector is thriving, the uncertainty surrounding a looming Brexit means that firms will need to be prepared for any eventuality.

In this blog, I analyse the success of the sector overall, what Brexit could mean for the sector, and what businesses are doing to prepare themselves. 

A booming sector

With the demand for housing continuously increasing, the Government has committed to delivering an average of 300,000 homes per year by 2020. A brownfield register has revealed more than 26,000 hectares of developable land which will help reach the target.

Similarly, in the commercial property market there’s plenty of appetite for both new and refurbished office space. Deloitte’s London Office Crane Survey for Winter 2017 shows that although office construction is down 9 percent in the previous six months, demand for new space remains strong. The sector is also buoyed by a number of large infrastructure projects.

Could Brexit demolish what has long been a strong Construction industry?

Although there is no shortage of demand, the uncertainty surrounding Brexit is causing a great deal of apprehensiveness within the sector. Indeed, research conducted by property and construction consultancy Gleeds found that 66 percent of industry contacts believe uncertainty around the shape of the Brexit deal is having a negative impact on the sector, with 24 percent preparing for conditions to get worse in the next 12 months. Below are the three major concerns keeping the industry up at night:

1. Workforce

The availability of labour constitutes one of the biggest issues Brexit potentially creates for the UK construction industry. The industry is significantly dependent on EU migrant workers, both for skilled and non-skilled roles. A shortage of workers could lead to higher project costs. In a post-Brexit environment, where demand outstrips supply, UK workers could insist on higher wages, which could hinder the achievement of the government’s objective to build one million new homes. 

2. Construction materials

According to UK Construction Media, approximately two-thirds of construction materials are imported directly from the EU. A weaker pound will lead to the rising costs of imported materials. On the other hand, the UK risks losing its tariff-free access to the single market, as well as facing the imposition of duties and limits on quantities. On the bright side however, all the relevant parties in the industry – investors, employers and contractors – may be affected and it is anticipated that they will be more inclined to work collaboratively to limit such effects.

3. Funding 

As a member of the EU, the UK has been one of the biggest net beneficiaries of EU funding. The potential loss of such funding could seriously challenge the existence of future construction projects, such as High Speed 2 (HS2) and Crossrail.  On the flipside, loss of funding may be rebalanced after the saving of the UK’s contribution to the EU, while the weak pound puts the UK in a positive light for investors. Overall then, the biggest challenge for the industry will be to present itself as an attractive investment choice regardless of the political uncertainties that dominate the delivery of Brexit.

In true British fashion, the industry must keep calm and carry on

Earlier this year, Construction News spokes to the FMB, CITB and CPA about what they’re doing to prepare the industry for Brexit and the steps being taken by their members. Below are just some of the talking points.

On migration, if industry is going to make the case to government about what the system should look like, industry needs to come up with a convincing plan of how it’s going to recruit and retain more of its own workforce domestically.

The FMB is heavily involved in apprenticeship standards delivery and T-level development, which will open the opportunity to significantly increase domestic training in the UK. One of the things they’re lobbying for is for the Department of Education to consider using some of the apprenticeship levy fund to incentivise employers to offer work placements, which will help encourage more individuals to upskill and join the workforce.

Meanwhile, the CITB is looking at how to really drive forward modern methods of construction and improve productivity. At the moment, the majority of the industry would be looking for the CITB or their trade associations to provide the leadership.

Although we cannot control the circumstances surrounding Brexit, industry leaders can control how they respond to whatever the outcome. In true British fashion however, this is a thick-skinned industry which in true British fashion will likely keep calm and carry on.

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