The referendum on the United Kingdom’s membership in the European Union is proving to be a divisive issue, with the public divided between leaving and staying. A Brexit on June 23rd could have far-reaching consequences in almost every aspect of life, from house prices to immigration policies. But what would a departure from the EU mean for the construction industry? Builder & Engineer magazine receives feedback from industry professionals.
THE COMMON PERCEPTION
A survey conducted at the beginning of the year by financial group Smith & Williamson revealed that only 15% of property and construction executives in the UK supported leaving the EU.
This appears to demonstrate construction industry support for the remain campaign, implying that the business interests of those included in the survey influenced their decision, explains Paul Manchester, director of construction site suppliers Manchester Safety Services.
According to the survey, confidence in the industry is at an all-time high, and executives are concerned about maintaining the careful balance of growth and prosperity.
“A radical decision, such as leaving the EU, could upset this balance and inhibit the growth and confidence within the industry,” Manchester says.
“Uncertainty about the global economy, taxation, and access to funding could erode the UK construction industry’s security. This could lead to an increase in conservatism among construction executives who are unwilling to take risks in an uncertain financial landscape.”
Few people in the construction industry support the leave campaign. However, Lord Bamford, chairman of JCB, believes that leaving the EU could be beneficial, calling pro-EU sentiments’scaremongering.’
“I believe it would be, because I don’t believe trade with Europe would make a difference.” There has been far too much fearmongering about issues such as jobs. Stopping trade is not in anyone’s best interests, in my opinion. I don’t believe either we or Brussels will erect trade barriers. It’s a burden on our business, and sometimes selling to North America is easier than selling to Europe.”
The free movement of labour between the UK and other EU member states is a valuable asset to the construction industry, with non-UK nationals filling a significant number of skilled and unskilled roles.
The construction industry employs approximately three million people in the UK (ten percent of total employment), with a significant number of these workers coming from other EU member states.
“If the United Kingdom leaves the European Union, skilled construction workers who would have previously considered coming to the country for work may find it easier to find work in France, Germany, or Spain,” Manchester explains.
Many consider freedom of movement to be the cornerstone of the UK construction industry’s success, allowing for the combination of a diverse range of skills in this multi-discipline environment.
“When considering that the key components of the sector are also cornerstones of the EU, access to labour and flexible working, it is less shocking,” says Mark Webb, chairman of Smith & Williamson’s property and construction group.
“The survey highlights the industry’s concern that if Brexit occurs, there is a very high likelihood of access to labour declining as margins are squeezed.”
Jamie Wood, director of Glasgow Roofing Service, is also concerned that if immigration laws change, Britain will be woefully short of tradespeople in the construction and housebuilding sectors.
“With such strict emigration laws, why would workers struggle across to Britain?” he wonders.
According to Paul Payne, managing director of construction and rail recruitment specialist One Way, support from specialist professionals across the EU is likely to become more difficult, potentially slowing project timelines and delaying completion dates.
“Our construction workforce may miss out on new knowledge and skills from their EU counterparts.” “In a field where new developments and green initiatives have an impact on the way we work, the ability to gain experience from across the continent is extremely beneficial in staying ahead of the curve,” he says.
Wood also expects the cost of labour to rise, which he describes as a “concerning notion” for small contractors and business owners.
The current cost of construction has risen by an average of 8% on labour costs in the last six months and is expected to rise further, according to Monika Slowikowska, founder of Golden Houses Developments.
“We predict that leaving the EU will increase this by an additional 15% to 20%,” she says.
According to Dr. Rod Wilson, director of engineering at Trolex, being a member of the EU has a positive effect on science and engineering. He fears that an exit decision will result in a significantly weaker UK sector.
“The UK is a very appealing place to work for scientists and engineers, and a larger pool of talent in the UK drives competitiveness, growth, and the creation of more of the high-value jobs we want in the UK.” The cultural awareness brought about by having more culturally diverse design teams also has a significant impact on the quality of our design.”
However, some supporters of the Brexit campaign will argue that leaving the EU will benefit UK workers. Without the competition of construction workers from the continent, UK professionals may have access to a broader range of construction jobs.
AVAILABILITY OF RESOURCES
Similarly to labour mobility, the EU can streamline the process of importing resources, tools, and materials from other member countries, explains Manchester.
As the construction industry becomes more diverse and progressive, so do the materials, tools, and techniques employed.
“The UK may be forced to forge new trade agreements if it follows the Swiss model of remaining within the single market but outside the European Economic Area. Without the clout of other EU member states behind the UK, dealmakers may struggle to secure favourable terms. And this could have a significant impact on the industry, potentially increasing the cost of resources, tools, materials, and, as a result, projects “Manchester explains.
“Material and resource constraints may result in higher acquisition costs. As a result, the cost of professional construction services would rise. This change would have an impact on those working in the construction industry, as well as any homeowners/businesses/organizations looking to hire such services.”
Slowikowska agrees that a non-EU UK makes it more difficult for the EU’s 27 members to invest in and do business with.
“Once out, we’ll need to negotiate new agreements with the 27 countries – either collectively or individually – which could take several years,” she says.
THE ECONOMY AND HOUSEBUILDING
Andy Hill, chief executive of housebuilders Hill, believes that a Brexit would be disastrous for the property industry and the economy as a whole.
“It is widely acknowledged that we need to build more homes faster, with over one million needed by 2020.” However, if investment in the UK remains at current levels, and demand falls significantly, developers will be hesitant to build more homes, making this figure extremely difficult to meet.”
While Jacqueline O’Donovan, managing director of O’Donovan Waste Disposal, is concerned that if the United Kingdom leaves the EU, there will be a great deal of uncertainty in the construction industry as “we try to figure out what the decision means for our industry.”
“There will be an impact on investment if we leave the world’s largest trading union.” There will be a knock-on effect, discouraging companies from investing in fleet safety technology and driver training, both of which are critical for the industry to grow and thrive. There is also concern that the exit will result in firms slashing their prices and cutting corners as work decreases and companies compete for any available work,” she says.
According to Kalpana Padhiar, risk underwriting manager and construction specialist at global credit insurer Euler Hermes, there is already concern that the sector is struggling to gain traction due to the referendum.
“The construction growth forecast has already been reduced three times in the last six months as rising input costs and lingering low margin legacy contracts, combined with global economic headwinds, continue to take their toll.” Housebuilding and commercial, two of the sector’s previous standouts, have both seen output fall since the end of last year.”
Matt Ainscough, CEO of Wigan-based national engineering firm Ainscough Industrial Services (AIS), believes that leaving the EU is simply too risky.
“A Brexit vote would seriously jeopardise the expansion and commercial viability of UK engineering firms like AIS, which is currently thriving by supporting manufacturing projects on the continent,” he says.
“As a national integrated engineering services provider, we provide a full suite of specialist operations on projects in the United Kingdom and throughout Europe, which are coordinated from our ten UK bases.” A decision to sever the UK and Europe’s invaluable close relationship would pose significant logistical challenges and could have an impact on AIS’s competitive market positioning.”
LOSS OF EU FINANCES
The loss of EU funding would be the most damaging effect of Brexit, according to Wilson, and “closing the door on access to these funding streams would have a very negative impact on UK innovation.”
Slowikowska explains that funds such as the European Structural Investment Fund (EUSIF), European Regional Development Funding (ERDF), and Joint European Support for Sustainable Investment in City Areas (Jessica) have proven invaluable to the UK.
“Examples include the £755 million committed to the North West between 2007 and 2013, a £24 million contribution to Scotland’s £50 million regeneration fund in 2011, and a similar investment in Wales.” The list goes on, encompassing the majority of major regeneration and social housing retrofitting projects across the UK. In fact, we are one of the EU’s largest net recipients of these funding schemes. “Leaving the group means we’re no longer eligible for this incoming investment,” she explains.
WORKING CONDITIONS PROTECTION
The EU labour law contains many of the rules and regulations governing working conditions in the United Kingdom. Working hours, health and safety, and worker posting are just a few of the important topics addressed by EU labour law.
“While many of the regulations and restrictions will remain in place if the UK leaves the EU,” Manchester says, “changing standards could lead to potential exploitation – with cowboy traders ready to take advantage of any uncertainty.”
“EU officials in Brussels have set the bar for human rights and equality of opportunity.” While the union is occasionally chastised for its overzealous approach to regulating everyday life and business, many of its policies have significantly improved the standard of living and working in the UK.”
According to Manchester, the consequences of an exit could be dramatic, with the cost of services potentially rising and the rate of new job creation slowing.
“Not only would the construction industry be impacted, but so would those who rely on its services.” From first-time home buyers to large corporations, the consequences could be immediate and significant. “The EU is not perfect, but a reactionary vote to leave could cause significant damage that could take years to repair,” he says.
“We would be the first country to leave the EU, we have no blueprint to base it on, and if we are going on hope and nostalgia alone, this isn’t enough for me,” Wood says.
However, as Payne points out, it is nearly impossible to predict what will happen if Brexit occurs until it occurs. “I guess we’ll just have to wait and see,” he says.