What is the Impact of Brexit on Construction?

Is it not yet known what Brexit will mean to the UK, as the Brexit agreement could take many forms, all of which are being decided and debated at present. Leaving the European Union will surely affect different aspects of the Construction industry and tender prices, all of which will become clearer as time goes on.

Demand, cost of labour, materials and availability of contractors all contribute to the construction tender prices, and how these change will all depend on the final Bexit agreement.

Hard Brexit and Soft Brexit are both terms we have heard often in the press. Hard Brexit being the complete withdrawal from the EU single market with no agreements put in place to replace them. Soft Brexit is an agreement that will be similar to that which is already seen, but with some restrictions on the movement of labour.

Demand for Construction Work

This will mainly be affected by the general economic situation of the country. Whether we have a hard or soft Brexit these will both affect the confidence of the consumer, which will in turn effect GDP.

The private sector demand for construction will be impacted as investment from the EU will suffer with a hard Brexit. With that, falls in the value of the Sterling will see more non – EU investments.

If GDP rises then the Government may be able to afford to invest, increasing the demand for public sector construction.

The supply, and cost of labour will be directly affected by whichever agreement comes into play. The UK construction industry currently relies on EU labour, and with more difficulty in this labour force coming to work, then there will be more pressure on site. In the negotiations the construction industry needs security for both existing resident and travelling EU workers to keep a balance.

The flow of labour from elsewhere in the EU can also be changed by the availability of work elsewhere, and the exchange rate making it worth finding work in the UK compared to other EU markets.

Material Prices

The cost of materials are directly affected by the tariffs seen on our current imports. These costs may be eased by the availability of substitutes from within the UK, or from non-EU countries with lower tariffs charged.

The exchange rate will affect the material prices on a daily basis, but with a falling value of our Sterling this will make everything more expensive. A hard Brexit is likely to have a negative impact on all currencies, not just the Euro, making all worldwide imports more expensive.

It’s not clear yet how Brexit will affect the availability of contractors in the UK construction industry but the deal made may come with issues. Will there be any barriers for EU based companies within the UK? Will specialist sub-contractors be able to come and work in the UK, and will this directly affect the firms own workforces?

With a deadline of March 2019 to complete the Brexit agreement, the way the current negotiations are going we may see a transition agreement first. This will delay any direct impacts on the industry, but it won’t help with the customer confidence, flow of labour from the EU, or the value of the Sterling.