What impact might Brexit have on the construction industry?

Jerald Solis, Business Development and Acquisitions Director, Experience Invest

The revised Brexit deadline – now set for 31 October 2019 – may have given the UK government some extra breathing space, however it remains to be seen just how Westminster will be able to manage the country’s withdrawal from the EU. The lack of political consensus has meant that businesses are none the wiser when it comes to understanding just what Brexit will mean for their respective industries.

Fortunately, sectors like construction have proven resilient in the period following the EU referendum. Indeed, according to the Office for National Statistics, in November 2018 – with less than six months to go until the original Brexit deadline – the total value of construction output exceeded £14 billion. This is the highest it has been since monthly outputs were first recorded in 2010.

What’s more, investment has not dried up. Public and private capital flows into infrastructure and housebuilding projects have created plenty of new opportunities for developers, ranging from the upgrade of existing transport networks to new-build housing complexes.

Yet, despite the strong performance of the construction industry, there are still a number of obstacles preventing businesses from reaching their full potential, and the majority of these stem from Brexit. So what are the challenges the construction industry could face in the immediate future?

What could Brexit mean for the construction industry’s workforce?

High on the list of concerns for many construction companies will be their continued access to skilled workers from across the EU. After all, the industry relies very heavily on overseas talent – according to the ONS, one in four (28%) of construction workers in London are from the European Union.

Should freedom of movement come to an end, it is unlikely that the UK will be able to satisfy its need for skilled labour through domestic workers alone. This doesn’t just concern construction – all eyes will inevitably turn to the government to see how it will continue to support a skilled workforce across different industries.

There is some speculation that the government will apply its Tier 2 visa regulations to EU workers, as is currently the case with non-EU workers residing in the UK. Alternatively, new visa schemes might be considered to lessen the restrictions on current and future migrants plying their trade in the construction industry.

Regardless of what transpires, there is vital need for businesses hiring skilled EU workers to understand what their visa status will be as a consequence of Brexit. Failing this, we could see a shrinking workforce in the construction industry.

Ensuring companies can access building materials

 Along with new restrictions to the free movement of people, Brexit could present new challenges when it comes to accessing construction products and materials.

The UK construction industry has long relied on imported materials, particularly from within the EU’s customs union. According to Build UK, more than £10 billion worth of construction products are imported from the EU each year, representing nearly 15% of all products used in the sector.

Should the UK’s membership of the customs union comes to an end, so will the free movement of goods. Losing tariff-free access to the single market could see construction companies facing import duties and limits on quantities of imported materials – ultimately increasing the operating and construction costs of developers.

In order to Brexit-proof the supply of materials, the government must work on establishing a fair withdrawal deal that protects trade. At the same time, it must offer construction companies comprehensive advice about how to prepare for likely Brexit scenarios, ensuring they can put into place a long-term strategy when it comes to accessing building materials.

Why Brexit cannot overshadow long-term challenges

Addressing aforementioned issues must remain a priority not just to see the UK through Brexit, but also for the long-term future of the sector. After all, a skills shortage and reduced access to materials could create a knock-on effect on an even more pressing issue – the national housing crisis.

Given the current imbalance between supply and demand, it is estimated that between 240,000 and 350,000 new homes must be put on the market in England alone in order to restore balance. However, the government’s current approach to ramp up housebuilding has so far been the subject of criticism.

In 2017/2018, the total housing stock in the country increased by around 220,000, falling short of the volume needed to ensure that there is amble supply to meet housing needs.

So as we head towards the new Brexit deadline, addressing the housing crisis must remain a national priority. This must necessarily start with diverting more attention and resources towards the construction sector, supporting current and future talent, and putting in place strategies to minimise the disruption from Brexit.

I firmly believe that the future of the construction industry looks bright. The sector has performed well since the EU vote, and continues to deliver valuable infrastructure and new-build houses. Demand for property is strong, and there is no sign of this slowing down anytime soon. Going forward, the industry must work hand in hand with government to ensure that construction companies can continue their projects whilst also being positioned to plan in the long-term. In doing so, the UK will be able to meet the evolving infrastructure and property demands of the populace.

Jerald Solis is the Business Development and Acquisitions Director at Experience Invest, a company that provides property investors in the UK and overseas access to exclusive investments across a variety of asset classes. He is also a Director at Opto Property Group; a construction firm committed to creating developments that have a long-term, positive impact.