What Does Brexit Mean For The Construction Companies?

7th November 2018
Tracey Glendinning

Collectively England appears to be holding its breath as the 29th March rapidly approaches. What life will be like in a post-Brexit England is currently a complete unknown. And while many have found humour in the Noel Edmonds “Deal or No Deal” situation we have found ourselves in, there are many who are bracing for the breakdown. Property owners, in particular, are watching closely to see how post-Brexit laws will affect their livelihoods. And waiting and watching alongside them are construction companies, architects, tradespeople and the rest of the building industry.

Britain is growing exponentially. The demand for property doesn’t appear to be ceasing even in the wake of the highly charged political climate. In fact, the Government has recently stated that they’re committed to providing another 300,000 homes by mid 2020. And Banks are seeing an influx of first-time buyers utilising the Help To Buy Scheme, which was another recent initiative set up by the Government. And yet Brexit seems to incite a nervous energy in everyone, with many fearing everything may suddenly crash after decision day. This fear is borne out of the crash in our currency and the unknown of what a “No Deal” may mean – is one example of why the scaremongering is palpable.

And whilst the Construction industry is booming now, many are wondering whether the good fortune will last. These uncertain times are seeing many tighten their budgets and finessing over terms and conditions – with no one wanting to be caught out on the 30th March 2019.

Argument One: Brexit will have serious complications for the construction industry

Gleeds, a property and construction consultancy firm learnt in their recent research, that 66% of industry contacts believed uncertainty over Brexit was having a negative impact on the construction industry. They also learnt that 24% of those interviewed believed conditions would get worse in the next year. The research reviewed by Gleeds can be suggested on a larger scale to support the feelings of the majority of those in the construction industry – particularly Architects and Building firms. This is because a lot of the developments are funded by overseas capital. And if the UK’s status wobbles, many believe investors will choose to build their business empires elsewhere. Cities such as Rotterdam and Dublin are already preparing themselves for an influx of businesses once Brexit has been finalised.

The division of labour is also a worry, with the construction industry already under strain to find the relevant workers. The UK’s position now means companies can easily employ EU citizens to fulfil the labour shortage. All of this impacts the cost of housing, materials and wages. The Federation of Master Builders (FMB) issued a warning that many companies would find their international workers would not return after seasonal holidays. Not only has the fall in currency had a knock on effect, but also it appears now more than ever construction is rapidly picking up in other European countries – which seem more appealing than the safety net England used to have.

Argument Two: Brexit will bring new opportunities and new businesses to the UK

Those on the opposing side of the argument are heralding Brexit as a time to cease the opportunities. The shift in the market will incite a new kind of savvy business owner. And construction companies and other businesses will just have to get used to a new way of doing things. One option is suggested by Chris Temple (of PwC) in his interview in The Telegraph where he says, “Infrastructure offers some good opportunities to the construction sector, it’s resilient and… we expect it will remain a key part of the market.” The Government estimate a £600bn public and private investment in infrastructure over the next decade (Analysis of the National Infrastructure and Construction Pipeline report, 2017). Which certainly seems to correlate with Temple’s suggestion.

Additionally, Brexit isn’t just a case for businesses; it will also impact people on an individual level. It will probably see an unprecedented number of people relocating, selling and buying. This will then have a knock-on effect on the property market, meaning those who are shrewd can make some lucrative decisions.

What’s happening now?

At the moment London continues to grow, with rents and wages increasing exponentially. Another major trend has seen the commuter move to the Southeast to capitalise on a lower cost of living. The Southeast has seen a huge rise in property demands, which many think will be replicated in the other counties after Brexit.

Coincidentally due to the dollar and other currencies being stronger than ever, London remains a property haven for those buying from abroad. London before and after Brexit will remain a multicultural, powerhouse for many worldwide.

In the meantime, London and the rest of the UK are constantly at the mercy of the public and whilst house prices may drop, it often rises steadily again. And therefore, construction companies may feel a ripple but that will soon pass.

For further information, please follow the link to Allianz, who have produced a white paper exploring the ways in which Brexit will impact the construction company and how the insurance sector can support it: https://www.allianzebroker.co.uk/news-and-insight/news/updated-white-paper-construction-market-outlook.html

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