We have already seen immediate consequences on labour, skills, raw materials/input costs and supply prices. This article explores the different effects Brexit could have on the construction sector and what businesses should do to prepare.
A hard Brexit, in which the UK gives up access to the single market, full access to the customs union and freedom of movement, could compromise industry stability.
According to a report from The Royal Institute of Chartered Surveyors (RICS), 8% of UK construction workers are EU nationals. The industry therefore faces the prospect of losing current and future workers, and must also find a way to cope with rising input costs.
RICS believes the government should take immediate action to minimise the impact of Brexit, by pushing for skilled international workers to be able to come to the UK and the ‘passporting’ of professional services. Freedom of movement is integral to the sector, for it has developed a dynamic industry with diverse cultural backgrounds and skill sets. If it becomes increasingly difficult for skilled EU workers to work in Britain, they will travel elsewhere and UK PLC will suffer.
David Sharp, Partner, argues that the skills gap would become a “skills divide”. He adds, “The British construction sector has been built on overseas labour for generations and restrictions of any sort would hit the industry hard. The lack of certain skills would “increase costs in the short and medium term”, as projects would be delayed and construction firms would face pressure to increase wages as demand outstrips supply.”
The ambiguity surrounding the UK’s access to the single market and the need for new trading agreements mean that future import costs are hazy.
“The industry must prepare for higher input costs and further pressure on profit margins. It is therefore important that firms plan ahead and look at the best and worst case scenarios they could face,” says David Sharp, Partner.
For now, with major infrastructure schemes underway, such as Hinkley Point C, a third runway at Heathrow, High Speed 2 and 200,000+ homes needed per annum, there certainly looks to be no respite in demand.
How can you respond?
Leighton Bower, Partner at Rouse Partners, adds, “Now is the time to take a step back and review your business. Are there areas in your accounting system that are not efficient, have you reviewed your margins across the business, are your management accounts aiding your decision making and are you getting the right level of professional advice?”
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