On 23rd June 2016, the UK held a referendum on whether to remain a member of the European Union. More than 30 million people voted and the result was a decision to leave the EU. Article 50 was triggered on 29th March 2017, starting a two-year process which will result in the UK no longer being a member of the EU by the end of March 2019.
Prime Minister Theresa May described this as “a historic moment” and it undoubtedly was. Whether you were in favour of or against Brexit, there’s no question that it will have a major impact on the UK, and on the UK’s Building & Construction Industry in particular.
The four main areas where the industry will be affected are:
- Its ability to recruit the people that it needs
- Its ability to import the materials that it needs
- Brexit’s impact on regulations and standards
- What will happen to major infrastructure projects
We took at a look at these four main areas and broke them down to examine the effect that Brexit will have on them.
For some time now, the UK’s Building & Construction Industry has relied heavily on foreign workers, many of which are from other EU countries. There are fears that if the right to free movement of people is withdrawn, the industry would no longer have access to this workforce. It is estimated that 175,000 EU workers – 8% of the workforce – could be lost.
The problem is compounded because even before the Brexit referendum, it had been recognised that the industry had a staffing problem. In February 2014, a Cross-Party Parliamentarians’ Enquiry – No More Lost Generations – predicted that 182,000 new recruits would be required by 2018. The Construction Industry Training Board’s Blueprint for Construction 2015-2019 claimed that 224,000 new recruits would be required by 2019.
It’s not just the number of people required. The lack of skilled people is also a concern. A CIOB survey in 2013 revealed that 82% of construction professionals felt there were not enough skilled people in the industry.
Although many people thought Brexit would lead to “British Jobs for British People”, if there aren’t enough suitable British people, the demand for workers could exceed the supply of them, putting inflationary pressure on wage costs.
Currently, around 64% of building materials are imported from the EU. Due to the Single Market, buying materials from another EU country is no different to using a UK supplier.
It is possible that post-Brexit there could be restrictions on what can be imported from the EU, making it difficult to access building materials. Customs Duties may also be introduced. Both of these would push up costs for anyone importing materials.
It might not all be bad, though. Once the UK has left the EU it would be possible for the UK Government to specify that only UK-based businesses could quote for government work, meaning that the UK’s Building & Construction Industry would no longer have to compete with foreign companies.
Regulations & standards
One criticism of the EU is that it imposes unacceptable levels of bureaucracy on businesses. Once we leave the EU, the UK could remove much of this red tape.
It is possible that new red tape would be needed. If the right to free movement of people is withdrawn, for instance, businesses may be required to ensure that anyone working for them or their subcontractors is legally entitled to work in the UK.
Lord Bamford, JCB Chairman, feels Brexit will reduce the costs of bureaucracy more than enough to compensate for any additional costs that will be incurred once the UK is no longer a member of the EU.
Major infrastructure projects
The European Investment Bank (EIB) and the European Investment Fund (EIF) have made major investments in the UK. In 2015, they invested €7.8 billion in infrastructure projects and lent €665.8 million to SMEs.
Once the UK is no longer a member of the EU, this source of investment will no longer be available. Although the UK will no longer be paying for EU membership, it’s unlikely that saving will be spent on infrastructure projects given that we are still in the age of austerity.