How ‘Brexit’ could affect the construction industry.

With the UK voting on the 23rd June to decide whether to remain in or leave the European Union, opinions are polarised despite the fact that a Brexit could spark economic turbulence with significant consequences to the UK economy. Everyone would be affected by leaving the EU but what significance would a Brexit hold for the construction industry?

In a survey of the property and construction sector carried out by accountancy, tax and investment management firm Smith & Williamson, a mere 15% of respondents from the UK construction sector were in favour of exiting the EU. The results show the construction industry has its own business interests at heart and that its self-confidence, with leading construction companies eager to ensure continuing growth and profits, is preserved.

Paul Manchester is a director of Manchester Safety Services, a supplier to the construction industry, and believes that the sensitive balance of the industry’s growth and confidence could easily be disrupted, particularly when taking into account funding, taxation and economies of other countries. He believes that all this could bring back a return to investment reluctance in boardrooms and a consequential construction downturn.

The opposite view is, however, given by Lord Bamford, JCB’s chairman, who believes that trade will continue with Europe, in addition to with America and other countries, because everyone will still want to do business. He also believes that it’s scaremongering to use the threat of losing jobs and business as a reason for not leaving the EU.

The construction industry’s workforce

There’s no doubt that the UK construction industry benefits from the easy flow of labour from the EU and a large number of both labouring and skilled jobs are taken up by those who aren’t originally from the UK. The construction industry itself provides millions of employment opportunities in this country, accounting for around 10% of all jobs nationally.

If the UK opts out of the EU, skilled and semi-skilled construction workers who would have made their way to the UK will now look to countries such as Germany, France or Spain for jobs. Many view the free-flow between the UK and Europe as the reason behind the success of the construction industry, providing the right blend of diverse skills needed in a multi-disciplinary sector.

The risks from changing immigration laws

Chairman of property and construction group Smith & Williamson, Mark Webb, explained that the pillars of the EU are flexible working and access to labour and commented on the Smith & Williamson survey saying it showed the construction industry’s concerns that Brexit could lead to a dwindling workforce and lower profit margins.

Jamie Wood, director of Glasgow Roofing Service, echoed these feelings by saying that a change in immigration laws could leave Britain lacking in skilled tradesmen. He asked what would draw workers to Britain if immigration laws were strict and many fear that getting support from EU specialists could become harder, thereby delaying projects and hampering completions and deadlines.

Many feel that the current ability to gain new skills and insights from EU specialists is a huge asset, assisting with eco-friendly initiatives for example.

Smaller construction firms would experience a rise in labour costs, which could put them out of business. Founder of Golden Houses Developments,

Monika Slowikowska, stated that construction labour costs have increased by around 8% in recent months and is likely to continue to do so. Exiting from the EU could see a further increase of 15 – 20% on the already disturbing figures.

The benefits of importing from the EU to the UK

Just as the EU enjoys the free movement of workforce, it also benefits from being able to import resources, equipment and supplies from other EU countries. Since the construction industry is becoming more diverse, techniques are growing and changing and it’s beneficial to be able to draw on resources from other member states.

Restricted resources and materials could lead to higher purchasing costs, the repercussions of which would be felt throughout the construction industry and further afield, eventually affecting the general housing market.

If the UK separates from the EU, other EU countries will find it harder to do business with the UK and it could take years to renegotiate new working relationships and trade agreements.

EU funding will be lost

Funding streams are the lifeblood of innovation in the UK construction industry and their absence will have a huge detrimental affect.

According to Monika Slowikowska, there are a number of important funds that wouldn’t continue to be available if we left the EU, funds that previously produced huge amounts, not just in England but also in Scotland and Wales. She says that, ironically, we’re net beneficiaries for this funding and its loss will be monumental.

Workers’ terms and conditions

Current legislation demanded by the EU provides much regulation of the UK’s working practices and while much of the current legislation may remain, there will undoubtedly be exploitation by those prepared to take advantage of the UK no longer being in the EU.

The EU has set high standards in human rights and equal opportunities to the benefit of our living standards and working conditions.

A whole spectrum of negative implications

Leaving the EU would have many other negative effects on the UK construction industry. Chief Executive at Housebuilders Hill, Andy Hill also holds the view that a Brexit would have serious consequences for construction as well as the general economy. His view is that by 2020 we need in excess of 1 million additional homes and that, without sufficient funding, developers won’t be able to build anywhere near that number.

Jacqueline O’Donovan, CEO of O’Donovan Waste Disposal, fears that investment in fleet safety technology and driver training will be seriously adversely affected by Brexit and that there’ll be a significant increase in price and cost warfare.

Kalpana Padhiar, a risk underwriting manager and construction specialist at global one of the world’s top insurers Euler Hermes, is seeing reducing activity in both the residential and commercial sectors because of the referendum, with downgraded growth forecasts, rising input costs and lower margin work having an affect.

Matt Ainscough, CEO of Ainscough Industrial Services believes that the current increasing work supporting European manufacturing projects will be in doubt and that this, in turn, will be a serious threat to the company’s continuing healthy-looking future.

Summary

An exit will be dramatic with increasing costs, slowing down of project and job creation, and much knock-on damage in the economy that will affect all the support services and not just the construction industry itself. The damage will be substantial and last for years.

As the first country to leave the EU, we’d be in unchartered waters travelling with little protection and completely unable to predict the outcome of a Brexit.