What Happens Next for Construction?

Brexit and the Construction Industry

The Effect of Brexit on the UK Construction Industry

23rd June 2016 saw an historic and largely unexpected decision to quit the EU. The Remain camp's predictions of economic chaos seemed to have serious teeth from the moment the returning officer in Sunderland announced the Leave verdict, and Sterling plunged, lemming-like, off a steep cliff.

Within days of the reality sinking in, the Eton-heavy cabinet was gone, replaced by new faces, and a Prime Minister who was the last woman standing as the other candidates fell away one by one. The most notable appointments were the so-called 'Three Brexiteers' – David Davis, Liam Fox, and Boris Johnson – with a sense of 'you made the mess; here's a mop and bucket.'

What might this mean for the construction industry in the UK? Theresa May's assurances that "Brexit means Brexit" are neither fish nor fowl - of course, since Article 50 is yet to be triggered, any predictions are just guesswork.

The construction industry since 1973

Although the introduction of the Health & Safety at Work Act in 1974 wasn't strictly a result of entry into the EEC the previous year, there was pressure to comply with the wider economic area, culminating 12 years later in the Single European Act, which required 'particular attention' to be paid to health and safety regulation. Prior to 1973, the poor health & safety record of the construction industry – second only to mining for workplace fatalities – prompted actor and former trade union activist Ricky Tomlinson to state that horses were treated better than construction workers.

The terms of Britain's entry into the EEC on 1st January 1973 were hardly negotiated from a position of strength, but as far as the construction industry was concerned, business was booming. 1973 saw only 85,000 construction workers unemployed (compared to around double that at the time of writing, and – allowing for population adjustments – with a proportionally similar number of unemployed jobseekers in total). The industry itself was similarly healthy, with construction representing 10% of GDP that year. Red tape took some getting used to, as it did with every other industry used to doing things as they had always done them; often for hundreds of years in terms of the law.

Free movement of workers initiatives in the late 1990s were a further bonus, bringing highly-skilled labourers from Europe, all prepared to work at significantly lower wages than their UK counterparts. The Construction Industry Training Board estimates that there are approximately 55,000 construction workers from Poland and Romania alone working in the UK at present. David Thomas, chief executive of Barratt Homes, estimates that up to 40% of construction industry workers in the capital alone are from mainland Europe, and that there is still something of a labour shortage even so.

What happens now?

For the time being, the UK remains in the EU. There are no precedents for what happens next, but one thing is certain – whatever does happen cannot happen overnight.

Talk of Hard Brexit, Soft Brexit, and even a Red, White & Blue Brexit are helpful only insofar as they may help to predict both the availability of labour, and the potential cost of materials. Otherwise, no one knows what they mean; even, apparently, those who will be negotiating the exit deal for the UK.

For the construction industry, remaining in the single market at the very least would appear to be a preferable outcome, if indeed Brexit is to happen. The key factors that influence profitability and growth within the sector – access to a mobile and flexible workforce, and preferential deals with EU member nations on materials – are most likely to be affected. With skilled labour in certain areas already in short supply, restrictions on free movement combined with no right to remain for those workers already in the UK could be disastrous. Rather than attempt to cut through red tape, those workers are far more likely to take their skills back to mainland Europe, leaving the UK construction industry with a serious labour shortage. A Hard Brexit in this sense could only be counteracted by serious investment in training at home, and even so, appropriately skilled workers won't be available for some time.

It is currently impossible to predict what an eventual triggering of Article 50 will bring; it is likely that both currency and stock market will dip once again, and that more big retail and industrial names will announce their intent to relocate outside the UK. Those that look forward to fewer business restrictions and less red tape will also find that laws will take decades to rewrite – EU membership or no EU membership. Much of what we take for granted in the workplace is courtesy of EU regulation.

However, it's in no one's best interests to restrict the movement of skilled labour or to hamstring trade agreements too stringently; Brexit may mean Brexit, but it is to be hoped that industry drives the deal.

 

This article was written 10/01/2017

 

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