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The impact of a 'no deal' Brexit

View profile for Perdeep Grewal
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What could the impact of a ‘no deal’ Brexit be for the construction industry?

With less than four months to go until the UK exits from the European Union (EU), the construction industry still faces uncertainty as to what is actually going to happen after Brexit.

The industry has displayed mixed views on the prospect of Brexit. The construction industry has just about recovered from the 2008 financial crisis, profit margins remain tight, skills shortages continue, and the Carillion collapse and the Grenfell tragedy continue to make the headlines. Adding to this is the increasing concern about the prospect of a ‘no deal’ Brexit and the potential challenges to the labour market and import of construction materials.

Labour skills shortage

The construction industry is heavily reliant on foreign migrant labour. The figures from the Office for National Statistics (ONS) show that one third of workers on construction sites in London were from overseas; 28% coming from the EU. This shows the construction industry is reliant on EU labour.

The Migration Advisory Committee (MAC) has advised the government to restrict access for lower-skilled workers. If immigration is restricted, the UK could witness high project costs and the labour demand would outweigh supply. Whilst it is unlikely that European workers would be sent back to the continent, hopeful construction workers may be reluctant to stay or even refuse to come to the UK in the first place. This could have a knock-on effect for the construction industry and its ability to meet the government’s £425 billion infrastructure pipeline. 

Import of construction materials

The construction industry is a heavy user of goods and materials supplied from the EU. A ‘no deal’ could impact importing construction products and materials into the UK. The Department for Business, Skills and Innovation estimated that 64% of building materials were imported from the EU. According to Build UK, a representative organisation for the UK construction industry, £10 billion of construction products are imported from the EU each year, including £750 million of aluminium products and £1 billion of timber.

After Brexit, importers may face duties or limits on quantities of goods. If the UK is unable to replicate the current arrangements in place, there could be an inflationary effect on costs of materials or even a shortage of construction materials. There are already talks of using a stretch of the M20 in Kent as a temporary lorry park in order to check paperwork for vehicles heading to and from Europe.

Final thoughts

It is difficult to tell exactly what the impact of a ‘no deal’ Brexit will have on the UK construction industry, save to say it is obvious that there will be uncertainty throughout the industry. The most pressing concerns are the reduction in skilled labour and the impact on the pricing of materials. It is therefore crucial that the government seeks to address this uncertainty. Currently this is causing developers to pause their projects as they await the outcome of the negotiations.

If you would like to discuss this issue further or have any other questions on this, please do not hesitate to contact me on 01245 453 804 or alternatively you can email me at perdeep.grewal@birkettlong.co.uk.

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