What Brexit could mean for the Construction sector?

Published: 7 March 2016

Brexit is currently one of the most hotly debated topics within the UK. Now that the date has been set for the vote, the next four months will be drenched in campaigns outlining the main arguments for and against Brexit, focused largely on the macro level economic impact, as well as sovereignty and immigration issues. Here in our Built Environment Practice, we have been discussing the topic and what it might mean for the sector.

If we take a look at the construction impact as a whole, Denise Chevin summarises the benefits that will possibly be lost/reduced if a “no” vote were to be dictated. The full article is a worthy read and can be found here.

One of the most serious challenges to the sector currently is the lack of new and existing skilled labour entering the UK market.  Only last year, The Guardian wrote of the declining number of new workers from school coming into the market and this was supported by The Telegraph’s article professing that the lack of skilled labour is holding back construction in the UK; and the latest market data from Building Magazine projects construction output to grow by a 3.6% in 2016 followed by further growth throughout 2017. With very little new workforce coming through domestically, businesses are reliant on overseas labour to supplement the shortages. Let’s face it; there have been no comforts of any substance being given by the Chancellor to promote the sector and attract new talent at a school leaver’s age with the new apprenticeship levy not going far enough. A ‘no’ vote – which is likely to remove freedom of movement - will only exaggerate the issues in a market that remains delicate and reactive to economic changes and that has been reliant on a migrant workforce for decades.

Another consideration that Denise highlights is the impact on both Environmental and Health and Safety legislation. Exiting the EU will allow the UK to remove the EU implemented “red tape” that it is currently constrained by. Granted; there will be a longwinded process that must take place to create and implement our own legislation, but this would likely be more favourable to the UK. Perhaps these changes could help to reduce the tremendous costs that are incurred by businesses through the often lengthy project timescales. In an arena that is desperately fighting cost inflation, any cost savings would be welcomed - and could even potentially help supplement the wage inflation

In terms of a senior leadership recruitment perspective; the impact is likely to be very small. The majority of UK contractors have boards and senior management teams predominantly made up of UK citizens and this is likely to remain the status quo for the foreseeable future. The small number of contractors, such as Bouygues, that have international, and primarily European, leadership teams are already well established in the UK and unlikely to undergo significant transformation in the short term. Furthermore, the medium term sees a reasonably sophisticated talent pipeline, most of which are already exposed to excellent training programmes that will develop the next wave of senior leaders. In addition, many of the operational experts in the UK have cut their teeth in international markets outside of the EU where they benefit from attractive remuneration packages, major programmes (the likes of which are not available on our shores) and a challenging workforce that will push anyone well beyond those in the UK. These foreign opportunities will continue to exist for new leaders without any impact from the EU relationship. But as time progresses, in the event  that Brexit were to happen (which is a big hypothetical) it will be interesting to see how the senior leadership dynamic for companies like Bouygues, EDF, Vinci, who are already entrenched in the UK market develops and changes.

Overall, it is difficult to find many individuals within the sector who argue that an exit will be beneficial. Whilst there are slim pockets where there is less pessimism, the void is certainly not filled with optimism.  A recent article in Building found that there was an “overwhelming 85% of construction and real estate companies” backing continued membership. Naturally, the hugely politically charged nature of the topic has deterred many PLCs from commented but the residing literature suggests that the sector would be best off remaining in the EU.

George Dobbins is an Associate Consultant in the Built Environment Practice 

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