KO – “knock-on” – effects of BrrrrExit

What is happening now is making history. According to BBC, the UK leaving the EU is the biggest “story” in Europe since the fall of the Berlin Wall in 1989. It is shaking the EU and UK too but nobody really knows what consequences this historical change might bring to Great Britain.

This blog was not written to speculate on the political implications but rather to summarise the possible ripple effects of leaving the EU on the construction industry and HOW it can be mitigated.

According to the most recent Market /Cips UK Construction Purchasing Managers` Index the building trade has suffered a significant slowdown in activity due to uncertainty around Brexit. Similarly like the UK property market, this stagnation is caused by the delay in making decisions, with companies being unwilling to commit to a project due to economic concerns. The added complication of skills shortage and higher project costs looks likely to aggravate the housing crisis, rather than proactively accelerate to achieve the government’s plans.

The Import and Export of Building Materials

Freedom of movement of goods within the EU after Brexit is problematic. The potential of leaving the EU without a deal, risks losing tariff-free access to the single market. Without such access we would see a further rise in construction costs.

This could be mitigated by the government if they issue a UK public procurement policy stipulating the use of British companies and products only; this could enable some cost savings on any imposition of tariffs and duties. 

Skills Shortage (Centre for London report)

An ageing workforce – 12% of workers are estimated to leave the sector within the next 9 years (equivalent to 36,000 workers)

Low apprenticeship take up: The number of apprenticeship starts in construction, planning and the built environment in the capital has declined by almost 50% in the five years to 2016.

A reliance on EU workers:  One third of workers on construction sites in London from overseas. Reduced migration resulting from Brexit is likely to be a compounding factor. With EU workers choosing to migrate to countries that are easier to access such as Germany, this shortage of labour will likely result in British workers insisting on higher wages. Therefore the cost of housing projects would increase too. Will limiting immigration have a knock-on effect to the construction industry?

According to NHBC Foundation research carried out in the industry the concerns over skills shortages were given as the main reason encouraging the use of MMC. Other reasons are a wish to increase build speed and housing output and to improve quality.

In light of these pressures, the report suggests that offsite housing construction and manufacturing could help to achieve faster delivery on-site than traditional construction – with schemes completed in about two-thirds of the time.

It also suggests that offsite construction could help to shift the workload from constrained construction sites to the more controlled, safer environment of factories, reduce local environmental impact and help to diversify the workforce.

It is high time to “literally” demolish walls, making a path for innovative, “Brexit-proof” construction methods.

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