It would seem that the only certain thing is that we are in for an uncertain future. Whether that outlook is positive or negative will largely depend on where you stand on the whole Brexit debate. Nevertheless, the construction industry relies on a confident market and the current levels of uncertainty are far from helpful.
Working with subcontractors from across the trades provides us with an insight into which issues are causing the most concern. And whilst we don’t necessarily have all the answers, because no one does, it’s worth sharing our thoughts on the key topics most commonly discussed.
Where will future investment come from?
The European Investment Bank and the European Investment Fund currently invest in major infrastructure projects in the UK to the tune of €7.8bn. Losing such major revenue streams would undoubtedly hurt. Of course, this needs to be balanced against the fact that the UK would no longer be paying large sums of money into the EU.
Having said this, it is not necessarily a straight quid pro quo in that there is no guarantee that the money saved would then be reinvested in the same sort of large-scale infrastructure projects previously funded by the EU. Of course, this may or may not come to pass, and other investment partners will clearly be sought, so it may be that any gaps in available investment will be more of a bump in the road than a long-term issue.
Will there be a big enough workforce?
A sizeable percentage (just under 30% by some estimates) of construction workers originate from EU countries. Whilst those living and working in the UK will, in general, have a right to remain, the government’s future immigration policy is sure to have an element of skills based criteria.
Thus far, the government has talked about using a ‘high skills’ barrier for foreign entrants, but there could also be room for policy adjustments based on the needs of particular industries. Whilst the required workers may not be high skilled, such personnel could still represent an essential component of an industry’s requirements. Although, the challenge will be whether the government’s policy machine can work at the speed needed to avoid short term disruption due to a labour shortage.
Will the cost of materials increase?
In a Post-Brexit Britain, the free movement of goods will, at least in theory, cease. Although this doesn’t mean that materials will not be available, it simply means that it may be more difficult to acquire them at speed and that, due to quantity controls and taxation, materials could become significantly more expensive.
Currently, around two thirds of building materials come from Europe and so there will either need to be a deal which protects the free movement of goods for a period of time, or the government will need to come up with creative solutions that ensure the industry can keep building and that costs stay under control. This could include exceptions to import taxes whilst Britain either reinvigorates its historically failing manufacturing industry, or new long-term supply partners are found.
What can be done to prepare?
Right now, there is still the prospect of a deal, no deal and even a no Brexit. And, whatever you may think of each scenario, there is no doubt that all these options come with some sizeable challenges.
In reality, many of these issues are outside of the average subcontractor’s sphere of influence and policy makers will inevitably have the final say. In the meantime, it is important to think about some ‘what if?’ scenarios and plan how you would cope.
For example, if you depend on materials which originate from abroad, how would you cope with a short-term disruption to the supply chain? If this means a delay in project completion, what penalties would you be facing? Also, are there any Brexit specific clauses in your current contracts and how would these impact your ongoing projects?
As nobody can foresee the future, not every risk can be mitigated, but you can at least be aware of the most likely issues to arise and, at the very least, be able to estimate the financial and operational impact on your business.
As construction contract experts, PJE International can help you review and asses your current level of risk and help you implement solutions designed to protect the profitability of your business. And of course, if the construction industry as a whole does come under pressure, you can be sure that main contractors will try and squeeze every penny out of their supply chain and subcontractor network. So, if you are affected by any unethical client behaviour, withholding funds which are clearly due, then we can also help you get paid in full and on time.