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30th June 2016

UK-EU Divorce: Will there be a silver-lining for Construction?

On Friday 24th of June 2016 the UK voted to LEAVE the European Union following a historic referendum, with a 51.9% majority vote. As a result of the vote, the UK is currently in a state of limbo, amidst a lot of uncertainty.

Brexit Implications For Construction

The result means after 43 years of membership Britain are now set to put steps in motion to leave the EU; a process that could take several years to complete. Here we discuss the concerns and potential impact on the construction industry.

Trade

Arguably, free trade has been the source for economic and business growth for the UK. This can be further illustrated by the total trade exports for April 2016 reaching £25 billion according to HMRC trade information. In a post-Brexit world however, the inability to trade in a single free market could lead to increased costs for building materials, however it is likely that trade agreements will be set up allowing the UK to remain part of the single market

In a recent publication by UK Construction Media, London’s largest private housebuilder Galliard Homes have stated “If the UK is not part of the EU then industry construction costs could rise by up to 15% since currently construction materials are imported and exported to the EU and are free of duty and taxes”. 

Investment

Due to low confidence investment is another area likely to be hit by the Brexit. According to cityam.com around £1bn of investment into the property and building industry has been delayed due to the EU referendum.  The Independent has echoed this claiming that “Anxious international investors have already pushed the pause button on future UK infrastructure investments”. 

One topical example is the expansion of Heathrow’s third runway, backed by the approval of £17.6bn worth of investment from David Cameron. The Guardian have stated the resignation of the Prime Minister has cast a shadow of doubt and the investment has been put on hold. Conversely, during his resignation announcement the current Prime Minister did say that he would do his best to steady the boat and guide the UK until his replacement comes into parliament.

Employment

According to Angus Armstrong, director of macroeconomics at the National Institute of Economic and Social Research, industries who benefit from the free movement of labour will be most affected. Our previous blog post Brexit: IN or OUT discussed how nearly 12% of the 2.1 million construction workers come from abroad; with Poland and Romania being the most common countries of origin.

Brian Berry, chief executive of The Federation of Master Builders (FMB), said: “The UK construction industry has been heavily reliant on migrant workers from Europe for decades now. It is now the government’s responsibility to ensure that the free-flowing tap of migrant workers from Europe is not turned off".

The FMB warned government must ensure that the construction sector have enough skilled labour to build homes and infrastructure projects, should a new immigration system come into place.

Future Outlook

There is no doubt that the next few years will bring unprecedented challenges to the construction industry. There will be new legislations on the horizion, meaning that the possibility of new trade agreements and free movement rights isn't ruled out. With the resignation of David Cameron, it has been mentioned that a new leader will be elected in October, and hopefully steer our uncertain country back to calmer waters. 

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